Cardinal Health drops $6.1B for Medtronic product lines

Dive Brief:

  • Cardinal Health has reached a definitive agreement to buy several of Medtronic’s medical device lines for $6.1 billion in cash.
  • The deal, announced Tuesday, gives Cardinal access to 23 product categories in patient care, deep vein thrombosis and nutritional insufficiency, including well-known brands used in nearly every U.S. hospital.
  • Revenues for the Medtronic units totaled $2.3 billion for the fiscal year ending October 2016, with more than 70% stemming from U.S. sales.

Dive Insight:

Dublin, Ohio-based Cardinal said the deal not only increases its portfolio but also expands its geographic scope and its access into operating rooms and long-term care settings.

Cardinal plans to finance the acquisition with $4.5 billion in new senior unsecured notes and existing cash. Once complete, the new businesses will become part of Cardinal’s medical segment.

Under the deal, Cardinal will also retain more than 10,000 Medtronic employees, making them part of Cardinal Health.

On Tuesday, Cardinal said it now expects fiscal 2017 adjusted earnings to be about $5.35 per share, the lower end of its forecast, due in part to generic deflation in the low double digits. The company’s previous guidance for the 12 months ending June 30, 2017, was $5.35 to $5.50 per share.

The acquisition is Cardinal’s latest bid to grow its medical supply business. The company bought vascular products manufacturer Cordis from Johnson & Johnson for $2 billion in 2015.

The medical supply market is expected to grow from about $98 billion in 2016 to close to $137 billion in 2021, fueled by the increase in certain medical conditions, efforts to curb avoidable medical errors and an aging population, according to Report Buyer.

Filed Under: Health IT Finance
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