Halyard Health, Inc. announced it has entered into a definitive agreement with Owens & Minor, Inc. to sell its Surgical and Infection Prevention business for $710 million. S&IP provides healthcare supplies and solutions that target the prevention of healthcare-associated infections.

The divestiture of the S&IP business accelerates Halyard's transformation into a pure-play medical devices business, with market leading positions in its core franchises of pain management and chronic care. As a growth-oriented business with a singular focus on devices, the company will be well positioned to succeed in its higher growth and higher margin categories. Halyard will benefit from a more simplified structure, enhanced management focus and significant firepower to invest in growth. The company will pursue a dual-track growth strategy through R&D and M&A, with a focus on maintaining and extending its leadership positions in its core franchises and expanding into attractive adjacencies.

"This transaction represents a natural evolution and is a milestone moment for both of our businesses. It accelerates our transformation to becoming a pure-play medical devices company and provides significant resources to accelerate our growth," stated Joe Woody, Halyard chief executive officer. "The S&IP business and its employees will have an exciting future as part of Owens & Minor - an ideal buyer with strong expertise in marketing and distributing these products in our major markets."

"This divestiture will begin the next chapter for our company, one that is defined by a high-performance culture focused on developing innovative solutions for our customers and addressing our industry's most pressing healthcare needs," Woody concluded.

"We have enjoyed a strong relationship with Halyard as one of their largest customers," said P. Cody Phipps, chairman, president & chief executive officer of Owens & Minor. "This transaction is value creating, and we look forward to welcoming Halyard's talented teammates and global capabilities to the Owens & Minor family."

Sale of the S&IP Business

The purchase price of $710 million also includes the Halyard Health brand and the company's current information technology platform. The company has initiated a rebranding process and development of a new information technology platform.

Halyard's remaining business is expected to undergo a phased restructuring to address dis-synergies and corporate costs associated with the divestiture. The company expects these dis-synergies to be eliminated through a multi-year transformation.

Halyard will provide information technology and other transition services to Owens & Minor for at least one year after closing as they integrate the S&IP business into their ownership. Transition services will also be provided by Owens & Minor to Halyard.

Use of Proceeds

Management will evaluate options for use of the proceeds, with the objective of maximizing balance sheet flexibility for future internal investment and M&A.

Halyard will provide more detail on the capital allocation framework at the time of close.

Closing and Advisors

The transaction is subject to regulatory approval and other customary closing conditions and is expected to close in first quarter 2018. The company will continue to be headquartered in Alpharetta, Ga.

Deutsche Bank Securities Inc. acted as financial advisors and Alston & Bird LLP as legal advisors to Halyard in connection with this transaction.

Third Quarter Performance and Updated Full-Year Guidance

As a result of performance year-to-date, the company is raising its full-year adjusted diluted earnings per share outlook to $2.03 to $2.13 from $1.85 to $2.05. The transaction is expected to close in the first quarter 2018, and will therefore have no impact on 2017 adjusted diluted earnings per share guidance. The company intends to provide 2018 guidance at the time of its fourth quarter conference call.