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Medtronic to Acquire RF Surgical for $235M BY ANDREW VAHRADIAN, JULY 14, 2015

Medtronic entered into a definitive agreement to acquire RF Surgical Systems, a medical device company that has developed a platform for the detection and prevention of retained surgical items such as sponges, towels and gauzes, helping surgeons avoid leaving such items inside a patient's body after the completion of a surgical procedure. The transaction value was approximately $235 million.

Surgical items that are left inside patients (retained items) after wound closure can lead to serious and life-threatening issues such as intra-abdominal abscess, intestinal fistula or obstruction, perforated colon, hemorrhaging or infection. Such complications may require additional x-rays and corrective surgical procedures in order to remove the retained items, and despite rigorous surgical sponge counting protocols and medical society-driven awareness efforts, the issue still persists worldwide.

RF Surgical's proprietary Assure Detection System utilizes a low radio frequency (RF) signal to track and detect surgical gauzes, sponges and towels (embedded with a RF tag) through blood, dense tissue and bone, and is designed to be used as an adjunct to manual counting methods to help prevent such "never events". The system is comprised of four components: a console, tagged surgical items, a detection mat and the Blair-Port wand. The technology intends to reduce patient complications due to surgery, lessen unnecessary procedures, and increase efficiencies within the operating room (OR). The OR staff receive a unique confirmation number after a successful scan, guaranteeing compliance. Management noted that the system is presently being used in more than 4,500 operating room, trauma and labor and delivery suites in the United States.

The transaction supports Medtronic's economic value strategy, which aims to offer products and services that deliver clinical and economic value to the healthcare system. Medtronic is focused on leading the shift to value based healthcare.

Medtronic will report the RF Surgical business as part of its Surgical Solutions division within the Minimally Invasive Technologies Group. The transaction is expected to meet Medtronic's long-term financial metrics for M&A events, and the annualized earnings impact of this acquisition is not expected to be material. The deal is expected to close in August 2015.

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