German specialty pharma Mallinckrodt ($MNK) has opted to sell off its contrast media and delivery systems (CMDS) business to Paris-based Guerbet for about $270 million as part of a strategic review of its business. The business has had declining revenues, but generates substantial cash and will mean a big step up for Guerbet.
Mallinckrodt estimates that once the deal closes in a few months it will lose between $415 million to $425 million from its fiscal 2015 revenues. That translates into a reduction of diluted, adjusted EPS of between $0.35 and $0.45. The CMDS business had about $210 million in sales during the first half.
On the Mallinckrodt imaging business, the company's SVP and CFO Matthew Harbaugh said on an earnings call in May, "We said this time last year that we are managing the business for cash, and the team ... has really delivered for us. So, we've seen good stabilization in the business, and we continue to look at alternatives as it relates to the business."
Mallinckrodt recently acquired the nitric oxide treatment business Ikaria for $2.3 billion, so integrating it is a top priority for the specialty pharma.
As for Guerbet, it expects to roughly double its revenue and hugely increase its employee count with the deal. The company had €409 million in 2014 revenue with 1,461 employees at year end. Mallinckrodt's CMDS business has four manufacturing facilities and about 1,000 workers, which will be included in the deal. So, Guerbet said the pro forma combined 2014 sales are close to €800 million and the combined global workforce is about 2,500 employees.
The CMDS business includes a range of products and delivery systems that work across computed tomography, magnetic resonance imaging, X-ray and cardiac catheterization, as well as its urological imaging system and related components.
"This acquisition transforms Guerbet and accelerates our future, said Guerbet CEO Yves L'Epine in a statement. Adding that, we "expect to successfully and rapidly complete this integration, becoming one of the world's top three contrast media and delivery system manufacturers."
- here are releases from Mallinckrodt and Guerbet