Covidien, Somanetics sign definitive merger agreement

Covidien plc (NYSE: COV) and Somanetics Corporation (NASDAQ: SMTS) today announced that they have signed a definitive merger agreement under which Covidien will acquire all of the outstanding shares of Somanetics Corporation for $25.00 per share in cash, for a total of $250 million, net of cash acquired. This acquisition is consistent with the Covidien strategy to expand into adjacencies and invest in product categories where it can develop a global competitive advantage.

“The acquisition of Somanetics will allow Covidien to broaden our product offerings and add another market-leading monitoring technology to its portfolio”

Somanetics is a leader in cerebral and somatic oximetry. The company had sales of $50 million in 2009 and has approximately 150 employees. Its INVOS® (In-Vivo Optical Spectroscopy) Cerebral/Somatic Oximeter, a noninvasive patient monitor, continuously measures blood oxygen levels in the brain and in the body of patients who are at risk for restricted blood flow so clinicians can detect and correct a variety of threatening complications. The INVOS System is the only commercially-available cerebral/somatic oximeter shown to improve patient outcomes.

"The acquisition of Somanetics will allow Covidien to broaden our product offerings and add another market-leading monitoring technology to its portfolio," said Pete Wehrly, President, Respiratory & Monitoring Solutions, Covidien. "The Somanetics product line, which we currently distribute in Europe, will expand our presence in the operating room. The acquisition will help us achieve our mission of enhancing the quality of life and improving patient outcomes."

"We are excited about joining Covidien and enabling Somanetics' shareholders to realize enhanced value for their investment," said Bruce Barrett, President and Chief Executive Officer, Somanetics. "We have enjoyed a strong, long-standing relationship with Covidien as the exclusive European distribution partner of our INVOS System. Our proprietary technology ideally complements Covidien's portfolio of respiratory and monitoring products."

Financial Highlights

Under the terms of the agreement, Covidien will pay $25.00 in cash per Somanetics share for a total of approximately $250 million, net of cash acquired. The combination with Somanetics will broaden Covidien's product offerings and is expected to be accretive to both revenue and earnings growth rates over time.

The transaction, which will take the form of an all-cash tender offer by a wholly-owned subsidiary of Covidien, followed by a second-step merger, is subject to customary closing conditions, including receipt of certain regulatory approvals, and is expected to be completed by July 31, 2010. The Boards of Directors of both companies have unanimously approved the transaction. All of the directors and executive officers of Somanetics have confirmed their intention to tender all shares held by them into the offer. Once the transaction has been completed, Covidien will report the Somanetics business as part of its Oximetry and Monitoring product line in the Medical Devices business segment.

Assuming a closing on July 31, 2010, Covidien expects that this transaction will be dilutive to 2010 and 2011 GAAP earnings per share. On a Non-GAAP basis, excluding transaction, restructuring and other costs, the transaction is expected to be neutral to earnings per share in fiscal 2010 and slightly accretive to fiscal 2011 earnings per share.