BD forms $500M JV with private equity firm Apax to house ailing respiratory biz

Becton Dickinson ($BDX) is spinning off its poorly performing Respiratory Solutions business into a joint venture with Apax Partners. The company had previously been expected to sell the respiratory business, which it gained as part of the $12.4 billion acquisition of CareFusion that closed almost one year ago. Apax will be the majority owner in the JV with a 50.1% stake.

The respiratory business had been expected to be sold for about $1.5 billion to $2 billion, but the valuation of it in the Apax deal came in at just under $500 million. Respiratory Solutions was the worst performing Medical business for BD, the company said when it reported its fiscal first quarter earnings in early February.

The business still has an estimated annual revenue of about $900 million, which makes the deal valuation a relative bargain. Still, those revenues are reportedly on the decline. The business includes Ventilation, Respiratory Diagnostics, Vital Signs and AirLife divisions. It employs more than 5,000 people globally with several locations around the world in locations including Yorba Linda, CA; Palm Springs, CA; Plymouth, MI; Mexicali, Mexico; Cotia, Brazil; Hoechberg, Germany and Shenzhen, China.

Steven Dyson

"We have been proactively targeting the industry for respiratory devices and have been impressed with the continued progress the company has made over the past few years," said Apax Partners' Steven Dyson in a statement. "We are pleased to have the opportunity to work with the entire team in further developing Respiratory Solutions' position as a focused and leading global player. In order to take advantage of this opportunity, we are highly supportive of an investment program to further strengthen the business's existing platform, both organically and through acquisitions."

Apax invests in consumer, healthcare, services as well as technology and telecommunications businesses. It's previously acquired med techs including device player Kinetic Concepts and diagnostics services company Unilabs.

The deal is expected to close in late fiscal 2016 or early fiscal 2017; BD's fiscal year ends Sept. 30. BD anticipates earnings dilution of about $0.10 to $0.14 due to the deal in 2017. It expects to record a material tax loss at the transaction close.

"We have determined that the Respiratory Solutions business and its associates will be best served under a different ownership model that will provide more strategic focus and investment to grow the business into a pure-play, global respiratory care leader," concluded Tom Polen, president of BD's medical segment. "We believe in Apax Partners' track record of success creating value and improving margins, and as part of the joint venture, we will continue to have a strong interest in the growth and success of the business."

- here is the deal announcement

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