Teleflex Incorporated ( TFX ), a global leader in medical devices, recently completed its divestiture of its original equipment manufacturer (OEM) Orthopedics business. The company had earlier inked a definitive agreement to sell the business to Tecomet for $45.2 million in cash.
The core capabilities of the divested business include dental, spinal and small bone implant systems and implant insertion instruments, flat or anatomic plates, mono- and poly-axial screws, straight and pre-bent rods and connectors.
Per management, the divestiture of this business underlines the company’s strategic plan to focus on branded products, new product introductions and investment in innovative technologies to boost long run growth, as well as drive margin expansion. The Teleflex Medical OEM division is in the meanwhile extending its TFX OEM and Deknatel brands, which are excluded from the deal.
For future consolidated financial statements, Teleflex will reclassify its OEM Orthopedic business as discontinued operations. The company’s legal counsel for the divestiture was Ballard Spahr LLP.
Teleflex, headquartered in Limerick, Pennsylvania, is a manufacturer and provider of medical devices used in critical care and surgery. Its move to divest OEM Orthopedic division along with the strategy of developing new, innovative products should help improve its financial performance in the long run. The proceeds from the sale of the OEM Orthopedic business, coupled with Teleflex’s ability to generate sufficient cash flow from operations will allow it to exploit growth opportunities.
However, Covidien ( COV ), C.R. Bard ( BCR ) and CareFusion ( CFN ) which operate in similar business segments present a tough competitive landscape for Teleflex. Additionally, the company operates in a stringent regulatory environment. The demand for its products is susceptible to healthcare reimbursement systems in the domestic as well as the international market.
Teleflex currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.