Less than a month after new CEO Omar Ishrak signaled Medtronic’s (NYSE:MDT) continued interest in selling its troublesome Physio-Control resuscitation business, the company found a buy ready to put nearly half a billion dollars on the table: private equity firm Bain Capital.
Medtronic said it’s agreed to a cash offer worth roughly $487 million for Physio-Control, which it’s been trying to unload for years. Plagued by recalls in 2009 and 2010, the division was a tough sell until February 2010, when the FDA lifted a consent decree barring worldwide shipments of automated external defibrillators.
Last month Ishrak said the company had no plans to spin out any businesses, except for Physio-Control. Medtronic has been shopping the business since 2006, saying it would do better as a stand-alone operation. But Physio-Control has been a headache since the company first announced its desire to sell, due to the series of recalls.
Medtronic said it expects to use a portion of Bain deal’s proceeds to offset its impact on its fiscal 2012 earnings. Current president Brian Webster will stay on to lead the business as CEO after the deal closes, expected during the first quarter of 2012.
"We are pleased that Physio-Control has found another strong partner to prepare the company for the next stage of its growth," Ishrak said in prepared remarks. "For more than 55 years, Physio-Control has been developing technologies and designing devices that are legendary among emergency medical response professionals. With an impressive innovation pipeline and backing by Bain Capital, we believe Physio-Control will be well-positioned for growth and to continue its lifesaving mission to serve emergency responders, hospital care teams and their patients around the world."
At least one Wall Street house viewed the move as a plus for Medtronic.
"While the sale isn’t likely to come as a surprise to most investors, we believe this news does remove an overhang on MDT shares," Leerink Swann analyst Rick Wise wrote in a note to investors.
The rest of The Street remains unimpressed. MDT shares were down 2.3 percent today to $33.43 as of about 1:40 p.m.