Boston Scientific agrees to sell Neurovascular business to Stryker

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Boston Scientific Corporation has announced the execution of a definitive agreement under which Stryker Corporation will acquire Boston Scientific’s Neurovascular business.

The purchase price is $1.5 billion, payable in cash, of which $1.4 billion is payable at closing and $100 million will be payable following the closing and upon the occurrence of the commercialization of the next-generation Target Detachable Coils and the transfer or separation of certain manufacturing facilities, which is anticipated to occur over a period of approximately 24 months. The Company expects to record a gain upon closing in excess of $500 million, excluding any impact of the receipt of future milestone payments.  Total after-tax proceeds, assuming the achievement of these milestones, are expected to be approximately $1.2 billion.  The Company expects to allocate approximately half of the net proceeds to acquisitions and the remainder to the retirement of pre-payable debt.  The transaction is expected to close before the end of the year, subject to receipt of regulatory clearances and satisfaction of other customary conditions. As a result of the divestiture, the Company expects 2011 earnings per share to be diluted by approximately four to six cents on both a GAAP and adjusted basis.


The Company will provide transitional services to Stryker through a transition services agreement, and will also supply products to Stryker.  During the transition period, products will generally be sold to Stryker at cost, with minimal contribution to Boston Scientific’s gross profit.  These transition services and supply agreements are expected to be effective for a period of approximately 24 months following the closing of the transaction, subject to extension. Due to the Company’s continuing involvement in the operations of the Neurovascular business, the planned divestiture does not meet the criteria for presentation as a discontinued operation. 

 

Accordingly, all historical financial results of the Neurovascular business will continue to be included in the Company’s results from continuing operations for all periods presented.  In periods subsequent to closing, the Company’s results will include only net sales to Stryker and an immaterial amount of gross profit related to those sales.

Boston Scientific established its Neurovascular business with the acquisition of Target Therapeutics in 1997.  Headquartered in Fremont, California, the Neurovascular business is a leading developer of less-invasive medical technologies used to treat brain aneurysms and other types of cerebrovascular disease.  The business employs approximately 1,150 people and reported 2009 revenues of $348 million.


“The sale of our Neurovascular business is part of our overall strategic plan that will refocus our portfolio to, amongst other criteria, leverage existing sales forces with least invasive, cost and comparatively effective medical devices that reduce or eliminate refractory drug regimens,” said Ray Elliott, president and CEO of Boston Scientific.  “The proceeds from this sale will allow us to invest in future growth opportunities more aligned with that strategy while also reducing overall debt leverage.”      

“We deeply appreciate the contributions of our Neurovascular employees and wish them continued success going forward in this new venture,” added Elliott.  “We believe this transaction will prove to be a win-win for all parties.”

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