Covidien's board approves pharma spinoff

Covidien's ($COV) board of directors approved the spinoff of its pharmaceutical division, which means the separation will be a done deal by the end of June.

The company has long planned to shed its Mallinckrodt business in order to focus more on medical devices, supplies and equipment. With the board's signoff on the measure, the company has disclosed some of the fine print outlining how the process will work.

On June 28, 2013, Covidien shareholders will receive one share of Mallinckrodt for every eight shares of Covidien stock they own. In addition, in lieu of fractional shares of Mallinckrodt, those shareholders will receive cash. Qualifying shareholders must be on the books as such as of June 19. As of July 1, 2013, Mallinckrodt becomes an independent company and will trade on the NYSE using the ticker symbol "MNK." Covidien continues with its symbol "COV."

Covidien chairman, president and CEO José E. Almeida said in a statement that the separation will help each to do better on their own.

"As separate companies, Covidien and Mallinckrodt will have greater flexibility to focus on and pursue their respective growth strategies and capital needs" Almeida said.

Covidien predicts a relative surge for both. The company believes its medical device business will grow 4% to 6% this year to up to $3.9 billion in fiscal 2013 revenue. Expectations are that its medical supplies business will expand 1% to 2%, to about $1.6 billion. On its own, Mallinckrodt will grow 7% to 11% year over year, Covidien expects, hitting as high as $1.4 billion (a jump driven by specialty pharmaceuticals that will counter medical imaging revenue declines).

- read the release