LivaNova to Sell Heart Valves Business for $73M; Wall Street Unanimously Bullish

LivaNova announced on December 3 that it has agreed to sell its heart valve business to investment firm Gyrus Capital for $73 million. The deal is expected to be finalized in the first half of 2021.

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The divestiture is part of LivaNova’s (LIVN) efforts to shift focus back to its neuromodulation and cardiovascular businesses.

LivaNova CEO Damien McDonald commented, “We believe that LivaNova and Gyrus will benefit from this transaction and, that under Gyrus ownership, the HV business will thrive and grow… For LivaNova, the divestiture of our heart valve business is an important milestone in the execution of our strategy to optimize our portfolio so that we are best positioned to serve our patients and deliver value to our shareholders. In particular, we intend to focus more directly on our key growth drivers and continuously improve our operational excellence.”

This segment of the business consists of its Perceval device and the Memo 4D mitral repair ring. LIVN stated in July that it was launching the Perceval Plus sutureless heart valve in Europe, and at the same time, was filing a PMA supplement for the device to the FDA.

The company had previously been building up its presence in the space with its acquisition of Caisson International in 2017. That said, it terminated the Caisson program in 2019 due to declines in revenue from the valve business.

Although shares are down 27% year-to-date, Wall Street has high hopes for LIVN. Its Strong Buy analyst consensus breaks down into 3 unanimous Buy ratings. With the average price target standing at $65.33, shares could surge 19% in the year ahead. (See LivaNova stock analysis on TipRanks)

Among the bulls is Needham’s Mike Matson, who reiterated a Buy rating and $68 price target after the news broke. “While dilutive to its 2021E EPS, we expect the deal to be accretive to LIVN’s revenue growth and margin profile over the longer-term and believe that this should justify a higher multiple that more than offsets the dilution. The deal makes strategic sense in our view since it should allow management to focus on its current growth drivers and pipeline,” he explained.