Physio-Control Breaks Away From Medtronic, Via $487M Acquisition by Bain Capital
One of the venerable names of the Seattle life sciences cluster, Physio-Control, is going to stand on its own two legs once again with the help of some old friends from Bain Capital.
Minneapolis-based Medtronic (NYSE: MDT) is announcing today an agreement to sell 100 percent of its ownership in Redmond, WA-based Physio-Control, the maker of heart defibrillators, to Bain Capital for $487 million in cash. Physio division president Brian Webster will be the CEO of the new privately held company, and Bain intends to keep the local management team in place, Webster says. Physio currently has about 1,000 employees worldwide, with 650 at its Redmond headquarters. It plans to add workers around the world once the deal is complete, Webster says, although he didn’t say how many. The transaction is expected to close in the next 90 days.
“It’s a great opportunity to be a private company, a standalone company, and invest in our growth,” Webster says. “When you’re a company in the public eye, you have a short-term focus, a quarterly results focus. One of the great opportunities with private ownership is you can take a longer-term view. That’s what we’re looking forward to.”
Physio-Control, founded in 1955, has a storied history as a pioneer in the field of defibrillators, which can shock hearts back into a normal rhythm for people in the midst of cardiac arrest. Medtronic, the world’s largest medical device company, acquired Physio in 1998 for $538 million and sought to sell it off as far back as 2006. That plan had to be put on hold the next year when the FDA said it discovered quality control problems with Physio-Control devices—a problem that was serious enough to halt defibrillator sales in 2007. The quality control issues weren’t fully resolved until February 2010, and after one more year of operations to get back on its feet, Medtronic put Physio back on the block this February.
While Physio is known mainly as a defibrillator company and gets the vast majority of its revenues from these devices, it has been positioning itself over the past couple of years as a more diversified maker of products for emergency medicine. Since Physio was freed up to resume unrestricted defibrillator sales, it has branched out by acquiring a cardio-pulmonary resuscitation technology from Jolife, striking a partnership with San Diego-based Benechill to develop a therapeutic hypothermia device to buy time for patients in emergencies, and by working on technologies to deliver patient data from remote locations to hospitals.
Those are the kind of innovative development efforts, Webster says, that the new Physio will seek to build on.
“It’s wonderful to have Physio back as a Seattle company as opposed to a small division of a very large international company based in Minneapolis,” says Kirby Cramer, a local medical device investor and former chairman of Bothell, WA-based SonoSite. “The company has been strapped for research funding the past few years as they worked through the issues with the FDA. It’s my understanding they have a clean slate now, and can go back to doing what they do best, which is to develop new products.”
Cramer, who has no business relationship with Physio, added that he “can’t think of a better buyer than Bain.”