Medtronic plans to spin off two of its businesses into a separate company, the latest move by the medtech giant to tighten its focus on the areas of high growth.
With $2.2 billion in revenue, the two businesses — patient monitoring and respiratory interventions — represent about 7% of Medtronic's $31.7 billion in annual sales in its latest fiscal year.
It's the second time this year Medtronic has announced plans to offload parts of its operations.
This move is the latest in an ongoing review of its businesses, with more acquisitions and divestitures possible, Medtronic chief executive Geoff Martha told analysts on a Thursday morning conference call.
"We remain focused on the ongoing portfolio management process and evaluating any potential additions and subtractions to our portfolio," Martha said.
Medtronic, operationally based in Fridley, expects the separation to occur within the next 12 to 18 months, pending regulatory and board approval. The company's stock trading up 0.5% in midday trading.
In May, Medtronic announced plans to spin off its renal care business to create a new independent company with DaVita Inc. The two companies will each own 50% of the newly-created venture. In fiscal 2022, Medtronic's renal business posted revenue of $325 million, or about 1% of its overall revenue.
The move to spinoff the patient monitoring and respiratory intervention businesses had been under consideration for a while, Martha said. "We're streamlining our business. This is about executing on a long-term strategy."
Medtronic continues to acquire companies that are "most aligned with our long-term growth strategies," he said.
Medtronic in May completed its $1.2 billion acquisition of Intersect ENT, a maker of products for sinus procedures. The company completed its $925 million deal to buy Affera Inc., producer of a cardiac mapping and navigation platform, in August.
Medtronic has not specified where the new company will be based or whether it will be public or private.
"The details of the intended separation and our approach continue to be assessed. We will continue to issue public statements leading up to the end of the intended separation, as appropriate," said Erika Winkels, a spokeswoman for Medtronic.
The two businesses in the spin off employ about 8,000 people globally and comprise a significant portion of Medtronic's respiratory, gastrointestinal and renal division that resides within its medical surgical unit. Medtronic employs more than 95,000 people worldwide.
"We do not anticipate any significant changes to day-to-day operations for the majority of our employees," Winkels said.
The spinoff is not expected to affect Medtronic's financial guidance for its fiscal year 2023, which runs through the end of April, Martha said. The businesses will remain part of Medtronic through the current fiscal year.
Martha said the separation allows Medtronic to focus its investments on areas that better align with its long-term growth.
"The process continues," Martha said. "This is a next step. This isn't necessarily the last step."
