06/15/2009 DEVICE MAKER MERGER BATTLE MOVES TO COURT
Law360, New York (June 12, 2009) - In a bid to save its merger agreement with Endocare
Inc., medical device maker Galil Medical Ltd. has filed a lawsuit to block Endocare from
combining with another company, Healthtronics Inc., in a battle that has also sparked a war
of words between commissioners at the Federal Trade Commission.
On June 8, Endocare announced that it had terminated its merger agreement with Galil, and
instead entered into a merger agreement with urology company HealthTronics, saying its
original deal with Galil could not be completed because of the FTC's refusal to close its
ongoing investigation into whether the merger violated antitrust laws.
In a statement Thursday, Galil noted that discussions with the FTC were continuing and that
the deal could still go through. "Galil remains very committed to successfully closing the investigation with the FTC, and
concluding our merger with Endocare," said Martin J. Emerson, president and CEO of Galil.
In a lawsuit filed in Delaware Chancery Court Tuesday, Galil has asked that Endocare be
enjoined from taking further actions to consummate its proposed merger with
HealthTronics, and that the original merger agreement between Galil and Endocare be
enforced.
Both Galil and Endocare are medical device makers focused on technology aimed at
minimally invasive tumor and tissue removal. Both produce products used for treatment of
prostate and renal cancer.
On June 9, FTC Commissioner J. Thomas Rosch issued a statement in reaction to Endocare's
decision to give up on its deal with Galil, saying the agency had failed to conclude its
investigation in a timely fashion, and was in effect blocking the merger.
“There is no legitimate reason why the commission should block this merger de facto by
letting the clock run out on the parties' agreement to abandon the transaction if the
investigation remained open,” Rosch said.
“In short, this case represents a 'poster child' for how protracted investigation of a
transaction or practice can result in the commission failing to determine in a timely fashion
whether there is 'reason to believe' that a transaction or practice will violate the antitrust
laws and the public interest. The commission simply must do better,”Rosch added.
Rosch also noted that he had seen no evidence that the merger between Endocare and Galil
posed a threat to competition, or that it would stifle innovation.
FTC Chairman Jon Leibowitz, Commissioner Pamela Jones Harbour and Commissioner
William E. Kovacic issued a joint statement challenging Rosch's analysis of the situation.
“Based on the the available evidence, and because the parties failed fully to comply with the
commission's requests for information, the commission could not justify closing its
investigation at this time. Absent the full disclosure of relevant information by the parties,
the commission would not be fulfilling its obligation to protect competition if it were to allow
the consummation of a proposed merger that threatens to eliminate head-to-head
competition in potentially life-saving products,” the statement said.
A spokesman for Endocare declined to comment on the lawsuit.
Galil is represented by Arnold & Porter LLP. Attorney information for Endocare was not
immediately available Friday.
The case is Galil Medical Ltd. vs. Endocare Inc. and Orange Acquisitions Ltd., civil action
number 4655-CC, filed in Delaware Chancery Court.
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