AGA Medical Prices IPO Below Lowered Expectations

NEW YORK (Reuters) – AGA Medical Holdings Inc (AGAM.O), a maker of devices for heart defects and vascular diseases, priced shares in its initial public offering at $14.50 each, below its reduced estimate, becoming the latest private equity-backed deal to face weak demand.

AGA, whose largest shareholder is private equity firm Welsh, Carson, Anderson & Stowe LP, sold 13.75 million shares and raised $199.4 million, below the $275 million it had previously estimated.

Minnesota-based AGA lowered the expected price range for its IPO on Tuesday morning to between $15 and $16 per share from $19 to $21 a share.

Shareholders increased the number of shares they planned to sell to 6.7 million shares from 5.25 million, and the company lowered the number it planned to sell.

Welsh, Carson, Anderson & Stowe will still own 51.7 percent of the company after the IPO.

Analysts had voiced concern that the earlier price range was too aggressive compared with peers such as larger rivals Boston Scientific Corp (BSX.N) and Medtronic Inc (MDT.N) and whether the company could compete with them.

“These firms have extensive product offerings and larger salesforces which foster stronger relationships with cardiac surgeons,” Morningstar analyst, Meera Veenu, wrote in a research note on Tuesday.

AGA also may have suffered from the fall on Tuesday in the shares of medical device makers.

Boston Scientific fell about 15.7 percent after it cut its profit outlook and warned that a tax in the health care reform bill could harm the medical device industry. [ID:nN20459334]. Medtronic fell about 3.5 percent.

AGA is scheduled to begin trading on Nasdaq on Wednesday under the symbol “AGAM.”

A number of private equity backed IPO’s have struggled with weak demand, including the offering by a company owned by Welsh, Carson — that of hospital operator Select Medical Holdings Corp (SEM.N)– which also priced below range last month and is down 2.7 percent from its IPO price.

Last week, RailAmerica (RA.N), owned by private equity funds managed by Fortress Investment Group LLC (FIG.N), lowered its price range ahead of its IPO, while Fortress sold one million more shares than expected. Shares fell 8 percent in their debut.

AGA’s lead product, the Amplatzer devices, treat structural heart defects and made up 55.4 percent of its sales in the half-year ended June 30. AGA warned in its prospectus it was likely to remain dependent on Amplatzer “for the next few years.”

The company has other products in development, including vascular grafts.

AGA had a loss of $4.2 million on sales of $94.4 million in the first half of 2009.

The IPO’s underwriters, led by Bank of America Merrill Lynch, Citi and Deutsche Bank Securities, have the option to buy an additional 2.06 million shares.

Separately, Chinese cable network equipment supplier company ZST Digital Networks Inc (ZSTN.O) fell 6 percent to $7.52 in its trading debut on Nasdaq on Tuesday after its $25 million IPO.

It sold 3.1 million shares at $8 a share in its IPO.

ZST provides television set-top boxes and digital networking products to cable system operators in China’s Henan Province. ZST’s IPO was managed by Rodman & Renshaw Inc. and Westpark Capital Inc. (Reporting by Phil Wahba, editing by Dave Zimmerman and Carol Bishopric)