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updated: 8/11/2011 2:33 PM

Covidien CFO says offer for drug unit would be considered

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Bloomberg News

Covidien Plc, the maker of surgical accessories and operating room products, would consider selling its pharmaceuticals business as the company works to bolster the unit's value, Chief Financial Officer Chuck Dockendorff said.

"If somebody were to approach us with an offer that is of higher value than the drug business is worth to us, that's certainly something we would look at," Dockendorff said in a phone interview today.

Covidien, which is based in Dublin, Ireland, and has offices in Mansfield, Massachusetts, was looking to sell the drug segment in a transaction that could fetch up to $4 billion, people familiar with the matter told Bloomberg in June. Today, the unit might generate as much as $4 billion in a sale, said Jeff Jonas, an analyst at Rye, New York-based Gabelli & Co.

"Without enough possible buyers that number could slide down," Jonas said in an interview. Given the current state of the market, it's unlikely that Covidien will sell, Jonas said.

Pharmaceutical sales were $1.46 billion for the nine months ended June 30, down 4.3 percent from a year earlier, Covidien reported on July 26 in its fiscal third-quarter earnings statement. Medical devices generated $5.74 billion in sales, a 16 percent increase from the prior year.

Valuable Asset

"The pharmaceutical business is an asset we think is very valuable and we're running it to make it more valuable," Dockendorff said. "It doesn't preclude us from doing anything in devices."

Selling the unit may streamline Covidien into a more- profitable and higher-growth company, said Michael Matson, an analyst at Mizuho Securities USA Inc. in New York. He also said it was unlikely a sale will occur in the current market.

"The drug business has been a pretty significant drag on their revenue recently," Matson said in an interview. "It would help their overall revenue growth if they sold the business."

Covidien rose $3.33, or 7.5 percent, to $48.03 at 2:48 p.m. in New York Stock Exchange composite trading, the biggest intraday gain since November. Earlier, the shares climbed to as high as $48.53 in the steepest increase since January 2009.

The company's board authorized a program to repurchase as much as $2 billion of shares, Covidien said in a statement today.