Sorin Group (BIT:SRN) said yesterday that its 2nd-quarter profits plunged nearly 80% , largely due to costs from its pending, $2.7 billion merger with Cyberonics (NSDQ:CYBX).
Milan-based Sorin said profits were €2.1 million ($2.3 million), down -79.0% from €10.0 million ($11.1 million) during Q2 2014. The merger with Cyberonics into a new entity called LivaNova cost €16.6 million ($18.4 million) during the 3 months ended June 30, Sorin said.
Sales grew 13.1% to €215.6 million ($238.9 million)during the quarter, the company said. The news pushed SRN shares down -3.1% to €2.59 apiece yesterday. The stock was trading at €2.60 ($2.88), up 0.3%, in late-day trading on the Borsa today.
“Our 2nd-quarter revenues exceeded our expectations, supported by robust revenue growth from the cardiac surgery business unit, driven by strong momentum in all cardiopulmonary product segments, and solid results in cardiac rhythm management. Adjusted net earnings were in line with our expectations, taking into account our continued investments in growth initiatives,” CEO André-Michel Ballester said in prepared remarks. “We continue to make good headway towards the completion of our merger with Cyberonics and we are actively progressing the integration of the two companies.”
Sorin said it expects to post constant-currency revenue growth of 3% this year, but discontinued its profits forecast in light of the Cyberonics merger and disavowed its earlier guidance.
The Cyberonics deal hit a snag this week after the state’s attorney of Milan moved to enjoin the deal, alleging that it’s “intended to insulate Sorin from potential liability related to pending environmental litigation” against Sorin’s former owner, SNIA.
Yesterday Sorin said asked an Italian court to speed up the case, which has an initial hearing slated for August 17.
“Sorin believes that the allegations made by the Italian State’s Attorney are without merit, and has commenced expedited proceedings to challenge the action brought by the Italian state’s attorney,” the company said. “Sorin continues to work with the relevant Italian authorities to facilitate their understanding of the structure of the pending transaction with Cyberonics in order to achieve a satisfactory resolution of the matter. Sorin remains hopeful that the objection can be resolved expeditiously and without delay on the expected closing timetable for the proposed transaction.”
The deal to create LivaNova, which won approval from U.S. anti-trust regulators in April, was slated to close by the end of the 3rd quarter.
Sorin also said Italian authorities ordered it and other parties July 28 to “promptly commence environmental remediation efforts at the affected sites” in the SNIA environmental probe.
“Sorin expects to file imminently a response brief outlining Sorin’s objection to such order and seeking to have execution of the order stayed,” the company said.