Covidien Sells Balloon Business to Prepare for Medtronic Merger

Nancy Crotti

November 5, 2014

2 Min Read
Covidien Sells Balloon Business to Prepare for Medtronic Merger

Covidien will sell its drug-coated angioplasty balloon device business to Colorado-based Spectranetics for $30 million--taking a $94 million hit on the book value of the business, according to Covidien.

Dublin, Ireland-based Covidien initiated the sale of its Stellarex device business to avoid U.S. regulatory action that might thwart its upcoming merger with Medtronic, a deal that is costing Medtronic $43 billion, Covidien said in its fourth quarter and fiscal year results statement released today, and a previous SEC filing.

The company predicted in that filing that it would "record a pre-tax impairment charge in the range of $90 million to $125 million in its fourth quarter results." The ultimate $94 million write-down accounted for the value of in-process research and development related to the Stellarex business, according to Covidien spokesperson Peter Lucht.

Covidien reported net sales up 7% and medical device sales up 8% for a quarter that president and CEO Jose E. Almeida called "outstanding," according to a Seeking Alpha transcript of the fourth-quarter earnings call.

Q4 GAAP-diluted earnings per share were $1.13, compared with 80 cents for the same period last year.

"We achieved significant EPS growth this quarter despite not buying back any shares... due to restrictions in the Medtronic transaction agreement and under the Irish Takeover Rules," said CFO Charles J. Dockendorff.

The sale of Stellarex is subject to approval by the Federal Trade Commission and other regulatory agencies, as well as closure of the pending acquisition of Covidien by Medtronic, Covidien said.

Spectranetics Corp. (Colorado Springs, CO) develops, manufactures and sells single-use medical devices used in minimally invasive cardiovascular procedures. Spectranetics will hire the approximately 80 Covidien employees who work on the Stellarex device, the company's chief financial officer Guy Childs told the Minneapolis-St. Paul Business Journal. Most are based in Plymouth, MN, with the remainder in California.

In previous maneuvers to ready itself for sale, Covidien (Dublin, Ireland) snapped up Sapheon, Inc. (Morrisville, NC), a developer of venous disease treatments; and Reverse Medical Corporation (Irvine, CA), a small, privately held company that makes devices to manage acute stroke and neurovascular disease. Terms of both transactions, announced in August, were not disclosed.

Nancy Crotti is a contributor to Qmed and MPMN.

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About the Author(s)

Nancy Crotti

Nancy Crotti is a frequent contributor to MD+DI. Reach her at [email protected].

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