The sale of the British medtech giant's gynaecology business takes place as its CEO continues to focus on growing the business organically.
|The Truclear uterine polyp and fibroid removal system has been a major growth driver in Smith & Nephew's gynaecology business. (Image courtesy of Smith & Nephew)|
Smith & Nephew will sell its gynaecology unit to Medtronic for $350 million, and return $300 million to investors in a share buy-back program in July, the company said Wednesday.
Sales of the company's Truclear uterine polyp and fibroid removal system brought in $56 million in 2015, or slightly more than 1% of group revenue, it said in a statement.The gynecology business is a better fit for Medtronic, the British medtech giant added.
Smith & Nephew had reported first-quarter revenue of $1.14 billion on May 5, missing analysts' sales growth expectations by 3%. Good U.S. sales were offset by weak demand in China and the Gulf states and a strong dollar, the company said.
CEO Olivier Bohuon characterized the sale as part of the company's "disciplined strategic approach to capital deployment and to crystallising value through divestiture at the right time." The company's effort to sell its gynaecology business had attracted strong interest, Bohuon said in the company statement.
Its main business lies in orthopedics, wound management, sports medicine, trauma and extremities. The company recently turned to 3-D printing to promote ingrowth for one of its newest titanium hip implant cups.
"Our shareholders will benefit directly from the return of the proceeds through a share buy-back program, in-line with our capital allocation framework," Bohuon added. "Gynaecology and its employees will benefit from a new owner with a synergistic platform looking to take the business to the next level."
The purchase "reinforces Medtronic's dedication to expanding the use of less invasive treatments and demonstrates a commitment to improving options for women with abnormal uterine bleeding," that company said in a separate statement.
"We believe gynaecology is one of the most underserved specialty procedure areas. Smith & Nephew has developed a rapidly growing business that expands minimally invasive treatment options for gynaecology patients," added Chris Barry, president of the Medtronic's Surgical Innovations business. "This acquisition expands our existing GYN portfolio and we believe creates opportunities to further explore and develop global therapies and solutions that improve GYN surgery."
Although Truclear was driving growth in Smith & Nephew's gynaecology business, that segment may not have fit in with Bohuon's overall plans for the company. Bohuon has recently redirected the company's emphasis on hip and knee replacements toward innovations in one of its oldest businesses--wound care. S&N has also supplemented such growth with smaller acquisitions, such as the $1.5 billion takeover of Austin, TX-based sports medicine device maker ArthroCare Corp. in 2014.
The acquisition is expected to close this summer. Smith & Nephew, Europe's largest manufacturer of artificial hips and knees, said it expects most of its gynaecology employees to join Medtronic, headquartered in Ireland. Most of Smith & Nephew's gynaecology employees work the United States, with the rest located in the U.K., the Netherlands, and Italy. The company will continue to manufacture the Truclear for Medtronic for an unspecified transitional period.
Medtronic has been on a buying binge, gobbling up smaller companies since its $50 billion acquisition of Covidien early last year. In January, the company announced it would buy privately held Bellco (Mirandola, Italy) which it described as a pioneer in hemodialysis treatment, for an undisclosed amount.
Learn more about cutting-edge medical devices at MD&M East, June 14-15, 2016 in New York City.
Nancy Crotti is a contributor to Qmed.
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