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PSS World Medical Inc. , a leading distributor of medical supplies and equipments to office based physicians, has agreed to sell off its specialty dental business to privately-owned equity firm, Beecken Petty O'Keefe & Company ("BPOC") for $68 million.

The deal is expected to close in October 2012, subject to certain terms and conditions. Per the terms of the deal, both the companies have agreed to transfer customers and employees in an organized manner.  

Management at PSS World Medical is optimistic about selling off its specialty dental unit to BPOC, based on its expertise in the healthcare industry. Chicago-based BPOC invests in middle-market healthcare companies via buy-outs and recapitalizations, and manages institutional and individual portfolios as well.

The divestment deal is in accordance with PSS World Medical’s restructuring initiative, announced at the end of the first quarter of fiscal 2013. The company is realigning its businesses in order to leverage revenue growth, improve operating margins as well as enhance management execution and overall customer service.

The dental specialty business was a part of PSS World Medical’s Physician business. In the last reported quarter, sales from the Physician business (including Laboratory) grew 7.3% led by acquisitions as well as solid gains from disposables and lab diagnostics, including pharmaceuticals and store brand equipment.

Despite the segment reporting solid growth, the company has decided to monetize dental specialty unit to focus more on its core business operations. It plans to utilize the amount generated from this divestment to expand its four focused business segments viz. Physician, Laboratory, Dispensing, and Home Care & Hospice.

With a market size opportunity of $7 to $9 billion, the company expects to expand its Physician business by 25% in the next five years based on innovative and cutting-edge solutions to improve caregivers’ clinical success as well as financial health.

However, the company faces stiff competition from other companies such as Owens & Minor Inc. (OMI - Snapshot Report). PSS World currently has a short-term Zacks #4 Rank (Sell rating).

Florida-based PSS World Medical distributes diagnostic and pharmaceutical products and healthcare information technology (IT) to front-line caregivers in the U.S. It also provides professional and consulting services to physicians to improve patient care. With a market cap of $1.13 billion and 4000 employees, the company has distribution centers located in all 50 states throughout the U.S.

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