--Medtronic will pay US$30.75 per American Depository Share

--The transaction is likely to close in the next few months

(Adds details of the deal in fourth paragraph, background of Kanghui in fifth and sixth paragraphs, industry background in seventh paragraph and figure of inbound M&A in healthcare sector in eighth paragraph.)

 
   By Prudence Ho 
 

HONG KONG--Medtronic Inc. (MDT) said Friday it agreed to buy China Kanghui Holdings (KH) for $816 million in cash, in a move to enter China's medical device market.

The U.S. medical devices maker will pay $30.75 per American Depository Share, representing a 22.5% premium to Kanghui's Thursday closing price of $25.11 on the New York Stock Exchange.

"Kanghui represents a significant investment in China, accelerating Medtronic's overall globalization strategy," Medtronic Chief Executive Omar Ishrak said in a statement.

The deal--the largest investment in a Chinese healthcare company by a foreign company this year--will bring Medtronic a broader product portfolio, local Chinese research and development, manufacturing operations and distribution network, said in the statement.

Kanghui, which was founded in 1997 and is headquartered in Changzhou, is an orthopedic device maker. The Chinese orthopedics market is fast-growing due to increasing healthcare expenditure fueled by reform in the sector, an aging population and an increasing number of orthopedic surgeons.

Last month, Kanghui reported second-quarter sales rose 23.6% on year to CNY101 million from CNY81.8 million in the second quarter.

"We view China's ortho industry as an attractive segment to multinational companies, driven by favorable price and volume trends. Leading local brands can help multinational companies capture growth in emerging channels and combat domestic competition," said in a Oppenheimer research report dated Sept. 13.

China have seen an increase in inbound merger and acquisitions in the healthcare sector in recent years. According to Dealogic, a total of US$1.32 billion inbound healthcare M&As were announced so far this year, a 3% increase from USS$1.28 billion for the same period of last year.

The transaction is likely to close in the next few months and is subject to approval from shareholders of Kanghui.

Citigroup advised Medtronic for the transaction.

-Write to Prudence Ho at prudence.ho@wsj.com

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