Healthcare products company Covidien Ltd. (COV) said Friday that its board of directors has approved the spin off of its pharmaceuticals business, Mallinckrodt plc, into an independent publicly traded company.
Dublin, Ireland-based Covidien said that the separation will occur by means of the declaration of a dividend in specie of the pharmaceuticals business, to be effected by the transfer of the Pharmaceuticals business from Covidien to Mallinckrodt.
Mallinckrodt will issue ordinary shares directly to Covidien's shareholders, who will receive one ordinary share of Mallinckrodt for every eight ordinary shares of Covidien held by them. Shareholders will not be issued fractional shares, but will receive cash in lieu of fractional shares.
José Almeida, Chairman, President and CEO of Covidien said, "Today's announcement marks another important milestone toward the completion of the Pharmaceuticals spin-off. As separate companies, Covidien and Mallinckrodt will have greater flexibility to focus on and pursue their respective growth strategies and capital needs, while potentially providing shareholders with greater value over the longer term."
Covidien expects the distribution to occur on June 28, 2013, to its shareholders of record as of the close of business on June 19, 2013. After the distribution, Mallinckrodt will be an independent publicly traded company and Covidien will not retain any ownership interest in Mallinckrodt.
Mallinckrodt ordinary shares are expected to begin "regular way" trading on July 1, 2013, on the New York Stock Exchange or NYSE under the ticker symbol "MNK". Covidien will continue to trade on the NYSE under the ticker symbol "COV". Covidien currently expects that "when-issued" trading for both Mallinckrodt and Covidien on the NYSE will begin on June 17, 2013.
In late April, Covidien reported a 12 percent decline in profit for the second quarter from last year, hurt by lower margins and restructuring charges and costs. Medical devices sales increased 4 percent from last year to $2.09 billion, pharmaceutical products' sales grew 13 percent to $573 million, and sales for medical supplies edged up 1 percent year-over-year to $439 million.
Earlier in May, Covidien revised its fiscal 2013 sales outlook to reflect the planned spin-off of the pharmaceuticals business. Covidien estimates that net sales in fiscal 2013 will be up 4 to 5 percent, including foreign exchange at current rates. Net sales at Mallinckrodt in fiscal 2013 are expected to grow 7 to 11 percent from 2012, assuming foreign exchange rate at current levels.
COV closed Thursday's regular trading session at $65.21, down $0.04 on a volume of 2.33 million shares.
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