Shares of Angiotech Pharmaceuticals jumped 11.3% to close at $14.00 yesterday, as investors basked in the news that the drugmaker, which manufactures drug coatings for heart stents and surgical tools, has agreed to buy the privately-held American Medical Instruments for $785 million.

In a statement, Angiotech noted that the acquisition of AMI significantly diversifies its revenue base as well as boosting its global manufacturing, marketing and sales capabilities, and investor excitement was sparked by the prospect of several new product opportunities the move will bring, as well the positive impact on near- and long-term growth.

Angiotech plans to fund the purchase with a $600 loan and $200 cash, and says the move will bolster its sales as soon as the groups merge. AMI generated sales of around $174 million for 2005, representing about 46% of the combined turnover the two groups would have booked for last year had the merger already taken place.

Following the close of the deal, which is expected in the second quarter of this year, AMI will become a new division of Angiotech, and the merged entity will hone its focus on general, plastic and ophthalmic surgery, as well as performing vascular surgery, interventional radiology and tumour biopsies.

AMI specializes in single-use surgical tools and devices, while most of Angiotech’s revenues come from royalties on the sale of cardiovascular stents sold by Boston Scientific, which has just agreed to acquire Guidant in a $27.2 billion deal. The Canadian firm developed and supplies the paclitaxel coating used on Boston Scientific’s Taxus drug-eluting stent.