Medical device and service provider Medtronic of Minneapolis announced that it has signed a definitive merger agreement under which it will acquire all outstanding shares of minimally invasive spinal surgery device developer Kyphon for $71 per share in cash. The transaction, which was unanimously approved by the boards of directors of both companies, is valued at approximately $3.9 billion.

Kyphon, a Sunnyvale, Calif.-based developer of minimally invasive spinal surgery devices, has focused on treating older patients suffering from vertebral compression fractures and spinal stenosis. Its products are used by orthopedic and neurological surgeons who specialize in spinal surgery as well as a significant customer base of interventional radiologists and interventional neuroradiologists.

Medtronic’s spinal surgery focus has been on providing treatment options for younger patients who are suffering from scoliosis and degenerative disc disease in the cervical and lumbar spine. Its target market has primarily been orthopedic and neurological surgeons.

The acquisition price represents a 32 percent premium over Kyphon’s closing stock price on July 26 of $53.68 and a 35 percent premium over Kyphon’s 30-day average trading price of $52.76 per share. The transaction, which is anticipated to close in the first calendar quarter of 2008, is expected to be neutral to Medtronic earnings in the first full fiscal year after closing and accretive thereafter, according to Medtronic.