Medtronic bids good riddance to Physio-Control with Bain Capital’s $487M buy

Five years after it first announced the desire to sell its emergency medical response business, Physio-Control, Medtronic (NYSE:MDT) has found a buyer in Bain Capital Ventures.

The private equity firm will pay $487 million in cash to buy back ownership of the Redman, Washington-based business it sold to Medtronic in 1998 for $538 million.

Physio-Control makes emergency medical response technology including defibrillators, chest compression system and cloud-based data management tools. Medtronic first expressed interest in divesting Physio-Control in 2006, but the slow-growing business needed time to recover after quality-control concerns caused it to voluntarily halt selling its external defibrillators in 2007. The U.S. Food and Drug Administration cleared the company to resume selling them in February 2010, but it was hit with a series of Class I recalls by theFDA later that year.

“Physio-Control has strategically not benefited Medtronic as we would have liked to see,” Medtronic CFO Gary Ellis said in an earnings call earlier this year. It had below-average profit margins and couldn’t compete with the investments Medtronic had to make in other divisions, he said.

The business brought in $425 million in revenue last year, flat from 2010 revenue but up from $343 million infiscal year 2009.

In a press release, Medtronic said it would use a portion of the proceeds from the sale to offset its impact on earnings in 2012.

Brian Webster, currently president of Physio-Control, will become CEO of the new privately held company and its management will stay intact. Once the deal closes in early 2012, it will likely add to its 1,000-employee workforce.

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