Covidien jettisons specialty chemicals unit

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Covidien plc (NYSE:COV) sold its specialty chemical unit to New York-based private equity firm New Mountain Capital LLC for $280 million in cash.

The sale involves the J.T. Baker and Mallinckrodt Laboratory Chemicals brands, which are based in Phillipsburg, N.J. Covidien said it expects the deal to close by the end of fiscal 2010.

The Mansfield, Mass.-based medical products conglomerate said that the decision to divest the unit is part of its strategy to “streamline its portfolio and re-allocate resources to its faster-growing, higher-margin businesses.”

Covidien medical devices president José Almeida told MassDevice in January that the company worked on consolidating its portfolio after its spin-out from Tyco International Ltd (NYSE:TYC) in June 2007. Covidien was in control of businesses as diverse as baby diapers, oxygen, sleep diagnostics and radiopharmacy, parting with each over the last two-and-a-half years.

“It’s easy to look at our portfolio and see the things that are adding value and see the things that probably don’t fit well here,” Almeida told us. Those divisions "will fit well with somebody else that has a different value proposition."

Analyst Rick Wise of Leerink Swann Research wrote in an email to investors today, "our sense is that due to its very different characteristics (more of an industrial business), [Specialty Chemicals] may have been a bit of a distraction for COV’s healthcare oriented  management team. COV is now exiting the last of its non-healthcare businesses inherited from Tyco, continuing its transformation toward a more  focused, faster growing and more profitable MedTech company."

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