Report: Cardinal Health Front-Runner To Buy J&J's Cordis
By Jof Enriquez,
Follow me on Twitter @jofenriq
Johnson & Johnson is reportedly speaking with a number of potential buyers for its Cordis business unit.
Cardinal Health is the “leading suitor” among potential bidders, according to Bloomberg, which cited people familiar with the matter. However, no deal is imminent, the Bloomberg article continued, and talks could collapse at any time. Cordis could be sold for as much as $2 billion.
Cardinal Health distributes drugs and manufactures medical equipment and surgical supplies. The company generated sales of $91.1 billion in fiscal 2014, according to Bloomberg.
Neither J&J nor Cardinal Health has commented publicly about a potential deal.
In September 2014, J&J was said to be looking to sell its struggling Cordis unit as part of a larger strategy to unload poorly performing assets. Cordis, a manufacturer of drug-coated cardiac stents and catheters, has suffered from dwindling sales and weak growth in recent years.
According to Bloomberg, J&J’s medical device business reported a 3.4 percent slide in sales last year, the weakest of the company’s divisions. Morgan Stanley’s Richard Goldwasser told Benzinga that Cordis’ sales this year are estimated to be approximately $925 million, but annual sales are declining roughly 2 percent.
Bloomberg quoted J&J CEO Alex Gorsky as stating that the company is open to divesting its smaller businesses. J&J has been planning for some time to exit the global market for cardiac stents, a market which it helped create.
Goldwasser noted that Cardinal’s CEO for its medical device business, Donald M. Casey, Jr., served as chairman of J&J’s comprehensive care group from 2010 to 2012. Casey “has a deep understanding of the Cordis franchise and positioning and how it would fit with Cardinal’s strategy,” Goldwasser told Benzinga.
Cardinal would be willing to pay $2 billion to acquire Cordis, and the acquisition could expand Cardinal’s medical segment margin by about 100 basis points, added Goldwasser.
J&J last year sold another non-core business, Ortho-Clinical Diagnostics (OCD), to The Carlyle Group for $4 billion. OCD, which manufactures screening and diagnostic products, operates independently under Carlyle.