A Medical Device Daily
Boston Scientific (Natick, Massachusetts) reported its intention to explore the sale of its fluid management business as part of the company's ongoing review of its portfolio of assets.
The Boston Scientific fluid management business, formerly North American Medical Instruments Corp. (NAMIC), produces a range of products used to manage fluid and measure pressure during angiography and angioplasty procedures. A sale would be expected to include the business as well as the company's facilities in Glens Falls, New York and Tullamore, Ireland.
The company didn't put a value on the business, where sales are reported as part of Boston Scientific's interventional cardiology business. That business posted sales of $767 million in the 1Q07, off 20% from a year ago amid declining sales of drug-eluting stents.
"As we have previously announced, we are conducting a comprehensive review of our non-strategic assets in an effort to focus resources on our core businesses and improve our financial strength," said Paul LaViolette, COO of Boston Scientific. "One result of this review has been the initiation of a process to explore the sale of our fluid management business. This is a very strong business with market leadership, and we believe it has tremendous potential with the focused attention and resources of external ownership. We are in the early stages of discussions with several potential acquirers, and we expect the process to take a number of months."
The company has racked up debt through last year's $27 billion purchase of Guidant (Indianapolis), a deal which brought Boston Scientific implantable cardioverter defibrillators (ICDs). The U.S. ICD market has been somewhat dicey since Guidant product troubles came to light in 2005, and Boston Scientific had a tough second quarter in ICDs.
Boston Scientific closed the second quarter with $7.4 billion in net debt, down from $7.6 billion after the first quarter, said Samuel Leno, the company's CFO, on Friday on an earnings call with analysts. He noted that the company's first two principal payments are $650 million in April 2008 and another $650 million in April 2009
In light of the second quarter and other factors, Moody's on Tuesday lowered the company's senior unsecured debt rating to Ba2, down two notches, and said the company's rating outlook is negative.
"Persistent weakness in the (stent) market and inability to gain consistent traction in ICD sales contribute to Moody's concerns regarding the company's cash flows," Moody's analyst Diana Lee said in a release.
Standard & Poor's cut Boston Scientific's corporate credit rating to BBB on Monday, citing the "disappointing second quarter" and "increased concerns regarding the company's ability to reduce debt in line with prior expectations." Fitch, meantime, cut its rating on the company to the same level in late April.
Company spokesman Paul Donovan said in an emailed statement to the Associated Press that the Moody's downgrade alone will not mean an increased interest rate.
"We are a diversified, growth-oriented company with strong gross profit margins, robust operating cash flows, a $2 billion undrawn revolving credit facility and more than $1.5 billion of cash on hand," Donovan said. "It has been — and continues to be — our practice to maintain a sound financial position to support our long-term objectives."
In other dealmaking news:
• Zareba Systems (Minneapolis) said it has entered into a definitive agreement with Holding GC, an affiliate of Groupe Cair (Lyon, France), for the sale of the company's Waters Medical Systems (Plymouth, Minnesota) subsidiary. Holding GC will purchase 100% of the outstanding stock of Waters Medical Systems for $5 million. The purchase price is payable in cash at the closing.
All sales proceeds will be used to reduce bank debt, the company said.
The agreement calls for a post-closing confirmation of the value of the "net assets" of Waters on the closing date, which could result in a reduction of the purchase price. The transaction is expected to close on or about Aug. 1, subject to customary closing conditions.
Zareba said it does not anticipate a post closing adjustment, but, if there is one, it believes it will not be material. The company expects to record a pre-tax non-operating gain of about $4 million as a result of the sale.
"As we have grown our electronic perimeter protection business units, the Waters Medical Systems business, though successful and profitable, represented a small portion of our overall sales and was no longer aligned with the strategic direction of the company. This transaction will help position Zareba Systems to focus our resources on the growth and development of Zareba's core business units, including electric fencing for animal control, access control products of electronic perimeter security fence systems and automatic gate openers," said Zareba president/CEO Jerry Grabowski.
• Cellular Technical Services Company (CTS; Valley Stream, New York) said it has entered into a share transfer, exchange and contribution agreement with SafeStitch and its members whereby SafeStitch members will transfer all of their membership interests to CTS in consideration for an aggregate of 11,256,369 newly issued shares of common stock of CTS.
SafeStitch is a privately owned early-stage endoscopic and minimally invasive surgery medical device company with a product portfolio that includes a device for endoscopic bariatric surgery and endoscopic repair of gastroesophageal reflux disorder, as well as an endoscopic device for excision of Barrett's esophagus.