August 10, 2007
BSX might need the pain management business
By Cory Hopkins
Natick-based Boston Scientific Corp. announced it is amending its merger agreement with California-based cochlear implant and pain management device company Advanced Bionics, which it acquired in 2004.
The re-structured agreement will eliminate previous shared management provisions and modify the schedule of earnout payments, the company said.
Under the new terms, Boston Scientific will keep Advanced Bionics' pain management device business, while selling the cochlear business and drug pump development program back to Advanced Bionics principals, according to Boston Scientific.
The modified payment schedule by Boston Scientific to former Advanced Bionics shareholders includes payments of $650 million in January 2008 and $500 million in March 2009, the company said. Advanced Bionics will acquire a controlling interest in the auditory and drug pump businesses for a lump-sum payment of $150 million at closing, expected in January 2008.
Boston Scientific expects to record an estimated after-tax charge of $360 million related to the transactions.
At the close of the deal, the parties will dismiss all currently pending litigation. Advanced Bionics founder Alfred Mann contended that BSX wanted to oust him unfairly, and was backed up by a federal judge.
The two companies have endured a rocky relationship in which Advanced Bionics complained Boston Scientific wasn't spending enough on product development, while BSX wanted Advanced Bionics to pay more attention to quality control after two cochlear implant recalls and an FDA warning letter was issued to the company.
The move by BSX comes as the company is trying to manage a heavy burden of debt after its 2006 acquisition of Guidant Corp. and a subsequent downturn in its bread and butter coronary stent market. The company's bond rating was recently downgraded by Standard and Poor's to BB+ from BBB-, and placed on negative CreditWatch, which means further decreases in ratings are likely.
The re-structured agreement will eliminate previous shared management provisions and modify the schedule of earnout payments, the company said.
Under the new terms, Boston Scientific will keep Advanced Bionics' pain management device business, while selling the cochlear business and drug pump development program back to Advanced Bionics principals, according to Boston Scientific.
The modified payment schedule by Boston Scientific to former Advanced Bionics shareholders includes payments of $650 million in January 2008 and $500 million in March 2009, the company said. Advanced Bionics will acquire a controlling interest in the auditory and drug pump businesses for a lump-sum payment of $150 million at closing, expected in January 2008.
Boston Scientific expects to record an estimated after-tax charge of $360 million related to the transactions.
At the close of the deal, the parties will dismiss all currently pending litigation. Advanced Bionics founder Alfred Mann contended that BSX wanted to oust him unfairly, and was backed up by a federal judge.
The two companies have endured a rocky relationship in which Advanced Bionics complained Boston Scientific wasn't spending enough on product development, while BSX wanted Advanced Bionics to pay more attention to quality control after two cochlear implant recalls and an FDA warning letter was issued to the company.
The move by BSX comes as the company is trying to manage a heavy burden of debt after its 2006 acquisition of Guidant Corp. and a subsequent downturn in its bread and butter coronary stent market. The company's bond rating was recently downgraded by Standard and Poor's to BB+ from BBB-, and placed on negative CreditWatch, which means further decreases in ratings are likely.
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