Vital Images Shares Hit New Yearly High on Toshiba Medical Systems Merger

Shares of Vital Images Inc. (NASDAQ: VTAL) jumped a new 52-week high of $18.71 on Thursday. The company said Wednesday it agreed to be acquired by a subsidiary of Toshiba Medical Systems Corp. for $18.75 per share, or about $273 million, through a cash tender offer followed by a merger.

The Minnetonka, Minnesota-headquartered Vital Images said its shareholders will receive $18.75 per share in cash for each outstanding share of Vital Images common stock they own. This represents a 39 percent premium over the volume-weighted average Vital Images share price for the past 30 calendar days.

As per the terms of the deal, it is anticipated that Magenta Corp., subsidiary of Toshiba Medical Systems, will commence a tender offer for all of the outstanding shares of Vital Images by May 11. The company's board of directors has unanimously approved the merger agreement and unanimously recommends that the stockholders of Vital Images tender their shares of company common stock in the tender offer.

The closing of the tender offer is conditioned on, among other things, the tender of at least a majority of the outstanding shares of Vital Images' common stock on a fully diluted basis, required regulatory approvals. It is expected that the transaction will close in the second or third quarter of 2011.

Toshiba Medical Systems has been our largest customer for a decade, as well as a strategic development partner. We will combine forces to enhance the multi-modality platform we have been marketing to hospitals in the U.S. and overseas. This transaction means we can now accelerate our global presence with the strength and backing of Toshiba Medical Systems, said Michael Carrel, Chief Executive Officer of Vital Images.

For this transaction, Morgan Stanley & Co. Incorporated acted as financial advisor to Toshiba Medical Systems and Simpson Thacher & Bartlett LLP is acting as Toshiba Medical Systems' legal counsel. Piper Jaffray & Co. acted as financial advisor to Vital Images and Faegre and Benson LLP is acting as Vital Images' legal counsel.

Additionally, Vital Images said its revenue, on a preliminary basis, for the first quarter of 2011 was better than expected for its non-Toshiba Medical Systems business, although revenues pertaining to Toshiba Medical Systems were negatively affected by Toshiba Medical Systems' business.

While overall first quarter 2011 revenue was better than first quarter of 2010, it will be slightly below analyst expectations. Earnings were largely in-line with expectations, the company said in statement.

Vital Images expects to report full first quarter financial results on May 2; however, in light of the pending transaction, the first quarter earnings conference call on May 5 has been cancelled.

Vital Images stock gapped open sharply higher April 28 at $18.66 compared to previous day's close of $14.18. The stock touched a new yearly high of $18.71 on Thursday.

The stock closed Thursday's regular trading up 31.45 percent at $18.64 on the NASDAQ Stock Market with a record volume of 6.69 million shares. The stock has grown from $15.76 on April 23, 2010 to $18.64 on April 28, 2011. The stock traded between $12.20 and $18.65 during the past 52 weeks.