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Is Hansen Medical a Takeover Target?

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Rumors are currently circulating that Hansen Medical (NASDAQ: HNSN) may be the target of a takeover. One of the biggest reasons that Hansen looks attractive to other companies is that it has a large array of products and intellectual property. To make matters complicated, Hansen's management has ties to Intuitive Surgical (NASDAQ: ISRG), which may or may not affect the chances of acquisition.

To learn more about the history between the two companies, Benzinga reached out to a source close to the matter who is also a shareholder of both Hansen and Intuitive Surgical.

To understand the complications between the two firms, investors must know about Dr, Fred Moll. Moll initially created Intuitive Surgical in 1995, to pioneer surgical robotic technologies. According to the source, “management changes in Intuitive Surgical prompted Dr. Moll to leave the firm and create Hansen Medical. Intuitive Surgical proceeded to give his new company licensing to various, non-critical intellectual property.”

Hansen Medical has since been able to use the patents to develop robotic technologies for vascular surgery. “Now that Hansen is growing and relatively cheap on the market, rumors are circulating that it may be a takeover target. To make things interesting, with the prospect of companies like Medtronic (NYSE: MDT) or Johnson & Johnson (NYSE: JNJ) acquiring the company, Intuitive Surgical may be considering a transaction as well.” However, nothing is confirmed.

The motives behind an acquisition by Intuitive Surgical are clear, but would other companies really want to purchase Hansen Medical? Using Medtronic and Johnson & Johnson as examples, Hansen Medical's robotic technologies appear to be attractive product lines that the large-cap companies could use.

Hansen Medical's capital structure is easy for potential acquirers to work with. Its debt-to-equity ratio has been low over the last several years. Most recently, its D/E ratio is 0.02, while competitors' average ratio is 0.6. Moreover, the company has not involved itself extensively with exotic securities like convertible debt or structured loans. Moreover, the bulk of its debt has short-term maturities and has been paid off diligently over the last few years. In the event of acquisition, the buyer would easily be able to pay off existing debt loads.

Hansen Medical's operations have been improving over the years as well. Clearly focused on research and development, the company's net income has been negative. However, over the last few quarters, the company's revenues have grown while expenses have stayed about the same. On the other hand, Hansen's cash position has not been improving significantly. Changes in working capital have played a large role in cash fluctuations, so the actual reasons for changes in cash are not as malicious as otherwise. One can also argue that growth prospects may be able to effectively increase the company's margins.

Mergers and acquisitions are always exciting for investors. Owning the stock beforehand or attempting merger arbitrage strategies have been very profitable for many traders, and the case for Hansen Medical may be as interesting. While only rumors are circulating regarding the company, investors may be convinced that Hansen is a suitable candidate for a takeover.

Hansen Medical is currently trading at about $4.09 and is up 174.5% for the year.

Posted-In: Long Ideas M&A News Rumors Small Cap Analysis Small Cap Movers Trading Ideas Best of Benzinga

 

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