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Medtronic cancels spinoff in favor of restructure

por John R. Fischer, Senior Reporter | February 26, 2024
Business Affairs
Medtronic will combine its respiratory interventions and patient monitoring units into one business within the main company.
More than a year after announcing that it would spin off its patient monitoring and respiratory interventions businesses as a stand-alone company, Medtronic has pulled a 180, instead choosing to combine the units into a new segment within its main company.

It announced the news on February 20 and saw its stock close 1.7% on the New York Stock Exchange that day, reported the StarTribune.

The new unit will be called acute care and monitoring (ACM) and will include products from both businesses, except for the respiratory interventions' line of ventilators, which Medtronic will phase out due to the products being “increasingly unprofitable,” according to its Q3 fiscal 2024 earnings report.

“Medtronic will continue to honor existing ventilator contracts to serve the needs of its customers and their patients, and expects that existing manufacturers, who today account for the majority of the market, can meet customer demand for new ventilators moving forward,” said the company in its report.

While Medtronic did not elaborate on its decision change, it said that “increased investment along with an improved competitive landscape” gave it a “strong conviction in driving durable category leadership in this newly combined business.” It reported that global revenues for Q3 fiscal year 2024, which ended January 26, amounted to $532 million within the patient monitoring and respiratory interventions group, a 2% rise in year-over-year growth.

The planned spinoff was announced in October 2022 with a timeline of 12 to 18 months. At the time, Medtronic said separating both businesses from its medical surgical portfolio would streamline operations and allow it to focus on core areas to boost revenue growth faster.

The spun-off company would have been called NewCo and included Nellcor pulse oximetry, Microstream capnography, BIS brain monitoring, INVOS perfusion monitoring, and HealthCast connected care solutions from the patient monitoring business; Puritan Bennett ventilators, Shiley airway portfolio, McGrath MAC video laryngoscopy, DAR breathing systems; and PAV+, NIV+ and IE Sync ventilation software solutions from respiratory interventions.

Sources at the time also said that Medtronic, while going ahead with the spinoff, was open to selling both units in a deal that could amount to over $7 billion. This news reportedly attracted interest from competitors such as Siemens Healthineers, GE HealthCare, and ICU Medical, according to Bloomberg News at the time. At one point, GE HealthCare and ICU Medical were said to be each in the running for a deal potentially as high as $9 billion.

It also caught the attention of private equity firms, like the Carlyle Group, which was reported to be the top bidder in a potential $7 billion buyout back in September.

Medtronic said its Q3 fiscal year 2024 global revenues increased 4.7% to $8.1 billion and has increased all of its forecasts for the upcoming year. It originally anticipated fiscal year 2024 growth to increase 4.75% year-over-year but has now boosted this prediction to 5%.

Medtronic did not respond to HCB News' request for comment in time for publication.

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