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Two endovascular device companies, ev3 Inc. (EVVV) and FoxHollow Technologies (FOXH), announced over the weekend a merger that would create a combined company with a $1.7 billion market cap.

Plymouth, MN-based ev3 has offered to pay $780 million for FoxHollow, of Redwood City, CA, which represents a 20% premium to the 30-day average trading price for FoxHollow’s shares. Both boards, and ev3’s shareholders, have signed off — pending approval by FoxHollow shareholders, the deal is expected to close in the 4th quarter of this year. Assuming successful completion, 2008 net sales are expected to be between $585 to $615 million.

ev3, whose name stands for the three endovascular markets it occupies — peripheral vascular, cardiovascular and neurovascular — would emerge with a majority stake, 59 percent, in the combined company.

The new organization would be based on ev3’s turf, in Plymouth, MN, and run by its CEO, Jim Corbett; he also would assume the role of chairman. FoxHollow’s chief, John Simpson, would become vice chairman and chief scientist. The combined company would have direct operations or independent distributors in over 60 countries, with more than 1,500 employees.

By joining forces, the two companies would create a single organization with one of the largest U.S. footprints in endovascular devices, with one of the most advanced product offerings. The combined portfolio would include PTA balloons, stents, embolic protection devices, infusion catheters/wires, embolic coils and liquid embolics.

FoxHollow would benefit from ev3’s international presence — it has a European division based in Paris — which would help increase penetration of FoxHollow’s SilverHawk Plaque Excision System. The device, which removes plaque that blocks arteries and interrupts blood flow, is FDA-cleared to treat de novo and restenotic lesions in the peripheral arteries.

ev3, through the merger, takes on a promising collaboration with Merck (NYSE:MRK). Formed in September 2005, the partnership between FoxHollow and the pharma giant was established to develop plaque biomarkers to accelerate the development of pharmacogenomic diagnostics and drugs for cardiovascular disease.

EVVV / FOXH 1-year chart

ev3

Source: ev3 And FoxHollow Technologies Announce Merger