Cardinal Health is nearing a deal with Medtronic to acquire the latter’s medical supply business for around $6 billion, Reuters reported.
Cardinal Health has recently grown its medical supply business with the approximately $2 billion 2015 purchase of Cordis from Johnson & Johnson.
- Cardinal Health has done well in the medical supply business, where the company expects revenue to grow in the mid- to high-single digits.
News that Medtronic was exploring a sale of its medical supply business surfaced earlier this year. At that time, it was not clear if Medtronic would pursue a deal with a single entity or if it would pursue multiple transactions. However, it appears that Medtronic is now negotiating exclusively with Cardinal Health.
The medical supply market is expected to grow significantly in the next several years. Increasing incidences of certain conditions, efforts to stem avoidable medical errors, and an aging population will factor into market growth from approximately $98 billion in 2016 to almost $137 billion in 2021, according to estimates from Report Buyer.
While the market for medical supplies is growing, there are more players involved today than there were in the past. Mainstream technology companies like IBM, Microsoft, and Apple have all entered the game and may be pushing medical supply mainstays like Medtronic out.
Cardinal Health and other companies with a hand in the medical supply business saw shares drop recently due to growing competition. While shares have since recovered, many of these companies are now watching Washington, D.C. to see if talks of legislation targeting drug and device prices will have an effect on their businesses.