Orthofix Sells Vascular Business to Covidien

Orthofix International NV has sold its vascular business to Covidien in a $19 million deal that will help the Dutch firm pay off debt and improve its earnings this year.

Orthofix said the deal includes the sale of its AV-Impulse mechanical compression technology. The move, according to CEOAlan Milinazzo, will allow the company to focus on market segments that best represent long term growth potential.

“This transaction represents an important step towards focusing Orthofix on strategic market segments that represent long term growth potential for the company,”Milinazzo said in a prepared statement. “Additionally, the proceeds from the sale of this business will allow us to further deleverage our balance sheet.”

As a provision of the sale, Orthofix has agreed to provide “transitional services” to Covidien for as long as five months and supply the medical products conglomerate with two years’ worth of Impads that are used with the AV Impulse devices. Orthofix also has agreed to supply Covidien with additional products for 90 days.

Orthofix raised its full-year guidance as a result of the deal, saying it expects earnings per share to range from $2.24 to $2.28. That revised guidance represents a significant increase from its previous 2010 EPS of $2- $2.04.The sale also is expected to reduce the company’s long-term debt by 7 percent and increase its first-quarter EPS by 42 cents.

Despite the boosts in quarterly and full-year guidance, however, Orthofix expects the deal to lower first-quarter revenue between $2 million and $3 million. Expenses from the deal also are likely to lower full-year revenues:Orthofix now forecasts full-year revenue to range from $568 million to $576 million, a 2 percent drop compared with its original 2010 full-year revenue guidance of $580 million- $588 million.