A Medical Device Daily

HealthSouth (Birmingham, Alabama) reported an agreement to sell its Surgery Division to Texas Pacific Group (TPG, San Francisco/London) a private investment partnership that was founded in 1992 and currently has more than $30 billion of assets under management, for about $945 million. The purchase price consists of cash consideration of about $920 million and an equity interest whereby HealthSouth has the opportunity to participate in the future success of the newly-formed company. The future consideration is estimated to be worth $25 million - $30 million assuming a five-year horizon.

HealthSouth's Surgery Division is comprised of a network of 139 outpatient surgery centers and three surgical hospitals that provide surgical services to physicians and their patients across the country. The facilities are located in 35 states, with a concentration of centers in California, Texas, Florida, North Carolina, and Alabama. The new company will be among the nation's largest providers of outpatient surgical services, according to HealthSouth. The transaction is expected to be completed in 3Q07, and is subject to customary closing conditions, including regulatory approval.

"Today's announcement marks a major milestone in the strategic repositioning of HealthSouth as a post-acute healthcare provider, focusing on inpatient rehabilitative services. The proceeds from this transaction will be used to pay down a significant portion of our long-term debt, thereby strengthening our balance sheet and positioning us to grow our core business," said Jay Grinney, HealthSouth president/CEO. "Certain members of HealthSouth's senior management team including Mike Snow, COO, and Joe Clark, president of the surgery division, will be leaving HealthSouth to join the newly formed company, which is expected to remain headquartered in Birmingham.

HealthSouth will provide certain corporate support services to the new company for an interim period under a Transition Services Agreement.

Goldman, Sachs & Co. served as HealthSouth's financial advisor for this transaction.

In other dealmaking news: Integra LifeSciences Holdings (Plainsboro, New Jersey) said that it has agreed to acquire LXU Healthcare (West Boylston, Massachusetts) for $30 million in cash, subject to certain adjustments. LXU employs about 140 employees. After closing, LXU will be operated as part of Integra's Jarit Surgical Instruments business activities.

LXU includes three distinct businesses: Luxtec, a maker of fiber optic headlights systems for the medical industry, including surgical headlights; LXU Medical, a special surgical products distributor and the exclusive distributor of the Luxtec headlight system in the southeastern, midwestern and mid-Atlantic states; and Bimeco, a critical care products distributor with direct sales coverage in the southeastern U.S.

The companies said transaction offers a number of strategic benefits to Integra LifeSciences, including the expectation that Luxtec brand of surgical headlight systems will provide the Jarit sales organization with increased exposure and growth opportunities in the hospital and ambulatory surgery center market. About 40% of Luxtec products are used by cardiovascular surgeons, 20% by general surgeons, 10% by neurosurgeons and 7% each by ENT and orthopedic surgeons.

It is also expected to provide increased access to specialty surgeons and allows us to position Jarit's growing lines of specialty surgical instrumentation directly to the end-user.

"The Luxtec surgical headlight system is a necessary and well-regarded product-line," said Rogowski, president of Jarit Surgical Instruments. "It will provide us with a unique entree to specialty surgeons, allowing us to highlight Jarit's growing lines of surgical instrumentation directly to the end-user. Also, there is a natural opportunity to combine Luxtec light sources with Jarit surgical retraction systems to provide our customers with a comprehensive and compatible package of operative-site illumination."

Integra LifeSciences focuses on regenerative medicine through the development, manufacturing, and marketing of surgical implants and medical instruments.

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