Angiotech disposes catheter unit

It has taken a trip through bankruptcy court and a newly inked asset sale, but Angiotech Pharmaceuticals Inc. is finally debt free.

Vancouver-based Angiotech agreed on Monday to sell its interventional products business, which manufactures biopsy devices and drainage catheters, among other products, to Argon Medical Devices Inc. for $362.5 million in cash. Argon is a portfolio company of private equity firm RoundTable Healthcare Partners.

Angiotech's shareholders must approve the deal for it to take effect. About 70% of them have already signed off on the buyout.

Angiotech manufactures medical devices used in interventional oncology, wound closure and ophthalmology through two segments: medical device products and licensed technologies.

The latter division generates royalty revenue derived from sales by partners Boston Scientific Corp. and Cook Medical Inc. on certain stents. The interventional products division -- part of the medical products unit -- manufactures biopsy devices and instruments such as BioPince and Tru-Core II, plus drainage catheters under the Skater brand, as well as certain components for other medical device companies. The business has facilities in Wheeling, Ill., Gainesville, Fla., and Stenlose, Denmark and generated $101.6 million in revenue in 2012.

For Angiotech, the deal is the latest step in a restructuring that has taken place both in and out of courtrooms in the U.S. and Canada. Angiotech levered up through its 2006 buyouts of American Medical Instruments Holdings Inc., for $788 million, and Quill Medical Inc. ($40 million), but couldn't cover the resulting debt payments when the revenue from its royalty streams declined.

On the brink of disaster, Angiotech huddled with various noteholders and put together a prenegotiated reorganization plan that it ultimately submitted to bankruptcy courts when it filed for Chapter 15 in the U.S. and for protection under the Companies' Creditors Arrangement Act in Canada on Jan. 30, 2011.

Through the proposal, Angiotech wiped out $250 million in subordinated note debt by handing those debtholders 96% of its stock. It then swapped $325 million in old floating rate notes for new notes and emerged with a $35 million exit loan from Wells Fargo Capital Finance on May 16, 2011. As of Sept. 30, Angiotech owed $229.4 million on its new notes due 2016 and another $60 million in additional floating rate notes, according to regulatory filings.

With the cash from the Argon sale, Angiotech will pay off all the note debt, retire the revolver, make an unspecified payment to shareholders and invest in its remaining businesses.

"This event represents the culmination of turnaround efforts we initiated upon concluding our 2011 restructuring, and is a direct result of the exceptional and improved business results our teams were able to achieve in 2012," said Thomas Bailey, Angiotech's president and CEO, in a statement.

By selling the interventional products business, Angiotech is left with a surgical products business that makes wound closure products, brand sutures for general and dental surgery, and devices used in eye surgery such as ophthalmic surgical blades. It will also maintain its royalty streams with Boston Scientific and Cook Medical. The surgical products and royalty segments generated $123.1 million and $15.1 million, respectively, in 2012.

After filing its 10-K with the Securities and Exchange Commission by March 31, Angiotech will no longer be a voluntary reporting public issuer, and will thus no longer file detailed financials with the SEC. Angiotech expects to close the deal before the end of April.

Athens, Texas-based Argon manufactures products used in interventional radiology, vascular surgery, interventional cardiology and critical care procedures.

Irell & Manella LLP provided Angiotech with legal counsel. Stikeman Elliott LLP was the seller's Canadian counsel. Moelis & Co. and Houlihan Lokey Inc. were Angiotech's financial advisers.