LivaNova has entered a binding letter of intent for the sale of its cardiac rhythm management business franchise to Shanghai-based company MicroPort for $190 million in cash. The companies, which have previously worked together in a joint venture, recently obtained approval from the Chinese Food and Drug Administration for their Rega pacemakers.
LivaNova’s cardiac rhythm management franchise makes high-voltage defibrillators, cardiac resynchronisation therapy devices and low-voltage pacemakers. The franchise generated approximately US$249 million in net sales in the fiscal year 2016 and has roughly 900 employees with operations chiefly in Clamart, France; Saluggia, Italy; and Santo Domingo, Dominican Republic.
LivaNova (formerly Sorin Group) and MicroPort founded a China-based joint venture in 2014. The joint venture, called MicroPort Sorin Cardiac Rhythm Management, achieved many milestones in the developing cardiac rhythm management products for the China market, according to a statement from LivaNova.
In September 2017, they received approval from the China Food and Drug Administration for their Rega pacemaker family, the smallest sized pacemakers available on the Chinese market.
Damien McDonald, LivaNova’s chief executive officer, says that the sale enables the company “to focus on LivaNova’s areas of strength and market leadership in our Cardiac Surgery and Neuromodulation businesses.”
“We are focusing our portfolio on businesses that contribute to our growth and drive shareholder value”, Macdonald says. “We will continue to take actions that strengthen our position as a focused med-tech innovator dedicated to improving the lives of patients around the world.”
LivaNova announced in September it was reviewing strategic options for the cardiac rhythm management business, including a potential divestiture.
The companies expect the transaction to close in the second quarter of 2018.
LivaNova anticipates it will recognise a material impairment primarily related to the intangible assets of its cardiac rhythm management franchise during the fourth quarter of 2017 as a result of the commitment to undertake the proposed transaction. Beginning in the fourth quarter of 2017, LivaNova will present its results from continuing operations on a pro forma basis with the franchise presented as a discontinued operation.
As a result, the company expects full-year 2017 net sales from continuing operations will decrease by approximately 20%, adjusted operating margin from continuing operations will increase by approximately 200-300 basis points, and adjusted earnings per share from continuing operations will decrease by 5% to 10%, compared to previous guidance provided on November 2, 2017 at LivaNova’s third quarter earnings call. Additional financial details will be provided during the company’s fourth quarter and full-year 2017 earnings call.
As closing of the proposed transaction will likely take place in second quarter 2018, MicroPort expects that the proposed transaction will have no impact to the company’s 2017 net profit.