Boston Scientific Sells Pieces of Investment Portfolio to Pay Debt

Boston Scientific Corp. has agreed to sell pieces of its investment portfolio through a pair of transactions that will raise a total $140 million before taxes and help pay off debt, but also force the medical device maker to record losses against second-quarter earnings.

The transactions are part of a string of cost-cutting and cash-raising moves by Boston Scientific over the past year to reduce debt lingering from the company’s $27 billion acquisition of Guidant Corp. two years ago.

Boston Scientific said it will sell the majority of its private investments by selling holdings in a portfolio of 54 companies to Saints Capital, a San Francisco-based “secondary” investment firm that acquires venture capital and private equity investments in growth companies.

Boston Scientific expects that transaction to raise $100 million before taxes. The Natick-based company said the sale will trigger an after-tax loss of $55 million, or 4 cents per share, against its second-quarter results, partly offset by expected after-tax gains of $15 million, or a penny per share, during the rest of this year.

Sam Leno, Boston Scientific’s chief financial officer, said the transaction “is part of our previously announced plans to divert nonstrategic assets, while focusing on our core businesses and increasing shareholder value.”

Separately, Boston Scientific will sell investments in a portfolio of venture funds and companies to private equity firm Paul Capital Partners for more than $40 million, before taxes. Boston Scientific expects an after-tax loss of $6 million on that deal, primarily in this year’s second quarter.

The Guidant acquisition increased Boston Scientific’s debt load more than fourfold, fueling investor worries that in part caused Boston Scientific’s stock to lose more than half its value since the company initially bid in December 2005 to acquire Guidant.

To reduce debt, Boston Scientific last fall revealed plans to cut about 2,300 jobs, or 8% of its workforce, and restructure operations to reduce annual operating expenses by around $500 million. The company also has sold off several business units, including its cardiac and vascular surgery businesses.

Boston Scientific’s acquisition of Guidant, a maker of implanted heart defibrillators and pacemakers, helped the company diversify a product line that had become overly dependent on heart stents to drive profits. Sales of newer model drug-coated stents have been hurt in recent years by research questioning the devices’ safety and effectiveness compared with older bare-metal versions.

SOURCE: Boston.com