First announced in November, the deal included the promotion of Brian Webster from president to CEO of the newly independent automated external defibrillator maker.
"Physio-Control is a market leader at the forefront of emergency response technology, with a well-earned reputation for sophisticated products that emergency responders and medical professionals rely on to save lives," Bain Capital managing director Chris Gordon said in prepared remarks. "Building on that legacy of innovation and a loyal customer base, we are excited to support Brian and his team in achieving even greater success."
Medtronic CEO Omar Ishrak said last fall that the company was considering selling the Physio-Control unit, ideally to a player in the equity market.
Medtronic had been shopping the business for five years, arguing it would perform better as a stand-alone operation than as part of a global conglomerate. But the company had trouble attracting a buyer, thanks to a series of recalls in 2009 and 2010 that involved the unit.
In selling the unit to Bain, Medtronic hopes to use part of the proceeds to offset any potential dilutive impacts from the transaction, the company said in a news release.
Physio-Control, the largest maker of emergency medical equipment and external defibrillators used to shock a stopped heart into a regular rhythm, was one of the Minneapolis-based company’s least profitable units. It halted shipments of the devices for three years in January 2007 due to problems with manufacturing quality and resumed sales in February 2010. The unit generated $103 million in sales for the quarter ended July 29, 2011.
Physio-Control did not fit well with Medtronic’s other divisions, including the unit that sells implantable defibrillators, Joanne Wensch, an analyst with BMO Capital Markets in New York, N.Y., told Bloomberg. While the company once thought they would work well together, external defibrillators and emergency medical equipment are sold to different buyers, including cities, and didn’t generate the same high profits, she explained.
“We believe that the lower margin, lower growth segment should go,” Wuensch told Bloomberg when the Physio-Control unit sale was announced. “It grew a whopping 1 percent in constant currency sales in fiscal year 2011. There are probably other things in that bucket that should go.”
Nearly 2,000 employees work for the Physio-Control unit worldwide.