Medtronic unloads instrument lines to Integra for $60M

Integra LifeSciences is buying Medtronic's MicroFrance instruments, pictured above--Courtesy of Medtronic

In its latest product acquisition, Integra LifeSciences ($IART) is buying instrumentation lines from Medtronic ($MDT) for $60 million in cash. These include about 4,000 MicroFrance and Xomed manual ENT and laparoscopic surgical instruments. The surgical products company will also gain a manufacturing facility in St. Aubin le Monial, France.

The MicroFrance business includes Xomed's manual ENT instruments; it designs, manufactures and sells reusable handheld instruments to ear, nose and throat (ENT) and laparoscopy surgical specialists. Medtronic acquired MicroFrance in 1999.

The move is intended to further build out Integra's Instruments business. Integra expects to record $27 million to $30 million in revenue and $0.10 in adjusted EPS from the acquired products during the next calendar year. That segment had $39.5 million in U.S. revenues during the second quarter, a decline of 4% from the same quarter a year earlier; the company does not break out its international revenues by business.

"The transaction provides access to R&D, service & repair and other infrastructure already in place in St. Aubin le Monial, France, which will improve our ability to service our current portfolio and to develop new products," Debbie Leonetti, Integra CVP and President of U.S. Instruments, said in a statement. "These products also align nicely with our current sales channels as well as adjacent divisions, particularly our Neurosurgery business."

The company's CFO, Glenn Coleman, singled out the MicroFrance business and praised it in a statement as advancing "our strategic objectives in both our Instruments and International businesses while meeting our profitability and return goals."

About two-thirds of the roughly $30 million in annual product sales from these product lines is generated outside the U.S.

Integra will fund the deal, which is expected to close in the fourth quarter, with cash held outside the U.S. At June 30, Integra had $137.2 million in cash--so the deal would cut that cash holding considerably. The company expects integration of the products to be complete by the second quarter of 2015.

Earlier this year, Integra bought a surgical line from Covidien for $235 million. In early September, it shuffled the leadership for its Orthopedics and Tissue Technologies business.

Last quarter, Medtronic's Surgical Technologies group had $381 million in revenues, a gain of 5%. It said growth was steady across the three segments that comprise it: ENT, Neurosurgery, and Advanced Energy.

Integra shareholders endorsed the deal, sending shares up 3% in early trading on the news.

 - here is the release