Orthofix to sell sports medicine unit for $157.5M

Orthofix International ($OFIX) is selling off its Breg sports medicine unit to Water Street Healthcare Partners for $157.5 million. The company expects net proceeds from the sale of roughly $140 million, which will be used for the prepayment of debt. The deal is expected to close in the second quarter.

During a call discussing the sale, Orthofix President and CEO Bob Vaters heralded the move as a "major strategic step for the company." Although he had kind things to say about Breg and its prospects, he pointed out that it wasn't integrated with the rest of the company. He added that the transaction will allow Orthofix to concentrate on repair and regenerative solutions for the spine and orthopedics, as well as biologics solutions.

In addition, Vaters said the deal would strengthen Orthofix's balance sheet and permit it to broaden its portfolio. When asked whether the company had any reservations about diving further in the spine and orthopedics arena, he said no, as the company is well-positioned and has a lot of financial flexibility compared with its peers.

He also didn't go into too much detail about what sort of M&A deals are in his company's future, but emphasized Orthofix's commitment to the areas of spine, orthopedics and emerging biologic technology.

During fourth-quarter 2011, the sports medicine unit saw net sales of $27.5 million, a 10% increase over the prior year period. The increase was primarily driven by the integration of a billing capability during the first quarter of 2011, the company said at the time. The company is scheduled to discuss its first-quarter 2012 financial results Thursday.

News of the sale comes shortly after former VP of sales Thomas Guerrieri pleaded guilty in federal court to violating the Anti-Kickback law over the sale of bone growth stimulators. He now faces up to 5 years in prison.

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