The acquisition of American Medical Systems by Endo Pharmaceuticals was announced Monday, in an all-cash deal valued at $2.9 billion. The surprise announcement sent shares of American Medical up 32% on Wall Street.

The acquisition gives Endo American Medical’s market-leading medical devices that treat pelvic conditions, such as incontinence and erectile dysfunction. The pairing is a good fit because of Endo’s portfolio of urology-related pharmaceuticals.

Endo will pay off $312 million of American Medical Systems’ debt as part of the deal. The acquisition is subject to approval by American Medical’s shareholders, as well as antitrust authorities.

The sale is expected to close late in the third quarter of this year.

Endo is not expecting to make sizable job reductions at American Medical, and American Medical’s CEO is expected to run the local operation for a year after the sale.

The new company will have about $3 billion in annual revenue and employ four thousand people worldwide.

Endo Pharmaceuticals primarily markets cancer, urology and pain drugs. In recent years drug and device companies have been operating mostly independently, but Endo foresee’s a more integrated model working better because of the health care reform laws.

Despite this view, some experts are skeptical that there will be more pharmaceutical and device-maker mergers in the near future.

San Diego mergers and acquisitions attorneys note that Endo has been an active acquirer recently. The activity is likely related to efforts to reduce reliance on sales of the pain drug Lidoderm. Endo’s patent for Lidoderm expires in 2015.

Source: Star Tribune “American Medical Systems brings $2.9B” 4/12/2011