Endo Pharmaceuticals (Nasdaq: ENDP) announced an agreement to acquire American Medical Systems (AMS) (Nasdaq: AMMD), a maker of medical devices to treat pelvic conditions, for $30 per share or $2.9 billion in cash, to boost its core urology franchise.

The purchase price, which includes the assumption and repayment of $312 million of debt, represents a 35 percent premium to AMS' closing price of $22.33 on Friday.

Endo said the combined company will be positioned to deliver more comprehensive healthcare solutions across its diversified businesses in branded pharmaceuticals, generics and devices and services, in the key therapeutic areas of urology and pain.

Minnetonka, Minnesota-based AMS' business consists of three segments: Men's Health, Women's Health and BPH (Benign Prostatic Hyperplasia) Therapy, with around 73 percent of its sales in the U.S. and the remainder coming from its international presence in Europe, Canada and the Asia Pacific and Latin America regions.

The combined company will provide additional cost-effective solutions across the entire urology spectrum, and will further Endo's diversification and increase revenue, earnings and cash flow streams, Endo said.

On a 2011 pro forma basis, the combined company, with about 4,000 employees, would have had revenue of about $3 billion and EBITDA of around $1 billion.

Through the acquisition of AMS, we will gain scale in devices and services, and will be positioned as a leading provider of healthcare solutions in the field of pelvic health, with a full spectrum of product offerings ranging from pharmaceuticals to medical devices, said Dave Holveck, Chief Executive of Endo.

Endo said the deal accelerates its growth, enhanced by the growth potential of AMS' current existing commercial portfolio, as well as potential new product introductions.

AMS has a leading position in several product categories that have grown revenues in the mid-to-high single digit range, which is anticipated to continue over the long term, Endo said. These include a broad range of products for erectile dysfunction prostheses and male and female incontinence, as well as GreenLight laser technology for enlarged prostate treatment. The company also has a strong pipeline of new products that will enhance the commercial portfolio and growth trajectory over the next few years.

This anticipated revenue and earnings growth, combined with strong margins and solid free cash flow generation, make AMS a compelling strategic fit for Endo. Endo said.

Endo said it expects the transaction to be immediately to add to its adjusted earnings per share this year. Endo expects the combination to be immediately accretive to adjusted earnings per share upon close and accretive by $0.60 in 2012, growing to around $0.80 in 2013.

Endo also expects to achieve at least $50 million in cost synergies by 2013.

The deal is expected to close late in the third quarter.

Endo also reiterated its stand alone 2011 revenue guidance of between $2.35 to $2.45 billion and full year adjusted diluted earnings per share to be between $4.20 to $4.30 per share.

Shares of Endo closed Friday's regular trading at $40.85 on the Nasdaq.

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