Boston Scientific sells California unit for $1.5B

Boston Scientific Corp., a major Minnesota employer has accepted a $1.5 billion offer for a unit that makes devices to treat strokes. Stryker Corp., a maker of artificial knees and hips, is acquiring the California-based business to move into faster-growing markets.

The neurovascular unit makes implantable devices that help treat aneurysms and clogged arteries in the brain, a new area for Stryker. The business comes with "a big price tag" that may seem too high to investors, said Michael Weinstein, an analyst at JPMorgan Securities in New York, in a note to clients.

The neurovascular unit generated $348 million in sales last year, the most in a global market worth $900 million, according to Stryker.

Natick, Massachusetts-based Boston Scientific said it expects after-tax proceeds of $1.2 billion from the deal and will use half of the money for acquisitions and the rest to retire debt.

Boston Scientific Chief Executive Officer Ray Elliott has moved to sell product lines, cut expenses and refinance debt acquired in the 2006 purchase of Guidant Corp. The world's second-largest maker of heart devices has been dealing with slowing sales of key products, cardiac stents and surgically implanted pacemakers and defibrillators that help treat heart rhythm disorders.

Boston Scientific announced Sept. 20 that it was buying Asthmatx Inc., a closely held company in Sunnyvale, California, that makes an asthma treatment device, in a deal that could be worth as much as $443.5 million.

Boston Scientific is also looking for a buyer for its neuromodulation unit, which makes implantable products used to relieve pain, said Rick Wise, a Leerink Swann & Co. analyst in New York, in a note to clients today. The unit competes with Fridley-based Medtronic Inc. and St. Jude Medical Inc., based in Little Canada.

While the neuromodulation unit "has the best core technology" of competitors in the field, Boston Scientific hasn't introduced a new product since 2005 and has lagged behind Medtronic and St. Jude in developing brain-stimulating devices to treat serious tremor disorders, Parkinson's disease and epilepsy, Sung said.

The neuromodulation unit had sales of $285 million last year, compared with almost $1.6 billion for Medtronic's unit. The comparable St. Jude unit had revenue of almost $331 million, according to data compiled by Bloomberg.

Boston Scientific's share price closed Thursday at $6.38, up $0.07 or 1.1 percent.