After becoming the worst-kept secret in the med tech world, Johnson & Johnson ($JNJ) formally announced that Carlyle Group wants to buy its Ortho Clinical Diagnostics business for $4.15 billion.
J&J has until March 31 to accept the offer. If everything works out, the deal will close by mid-2014, pending antitrust clearances and other requirements. Executives will discuss the proposed sale in detail during J&J's quarterly earnings meeting on Jan. 21, 2014.
Johnson & Johnson's intention to sell the division has fueled the industry rumor mill for months. In December, Reuters, Bloomberg and others reported that Carlyle Group, a global investment firm, had become the preferred buyer after a long process and simply needed to gather proper financing to close the sale. This week, even U.S. Sen. Charles Schumer (D-NY) blabbed that a deal with Carlyle was imminent, according to reports.
J&J's announcement, released early on Jan. 16, confirmed that the New Jersey conglomerate had received a "binding offer" from Carlyle Group. Alex Gorsky, J&J's chairman and CEO, said little about the sale, other than noting in a statement that "this transaction is a result of our disciplined approach to portfolio management" to achieve maximum shareholder value. He also referred to Ortho Clinical Diagnostics as a business division that "plays an important role in healthcare," and said that "it's well positioned to serve the interests of its patients, customers and employees."
Some of Ortho Clinical Diagnostics was once part of Eastman Kodak and the division employs about 1,000 people in the Rochester, NY, area (among other locales), the Rochester Business Journal noted. Johnson & Johnson disclosed a little over a year ago that it wanted to unload the division. The company has focused on streamlining and cutting costs, but executives were also rumored to be unhappy that Ortho's revenue hadn't grown more rapidly (after booking $2.16 billion in sales in 2012). Ortho Clinical Diagnostics has plenty of rivals, including Roche ($RHHBY), Danaher ($DHR) and Abbott ($ABT), that have claimed a much larger stake in the clinical diagnostics/laboratory blood test space.
Ortho still has plenty of money it can generate. It sells a wide variety of products including blood-screening equipment and laboratory blood tests focused on a variety of diseases.
Reuters reported earlier this week that Carlyle had pieced together a financing package for the sale that includes term loans, bonds, revolving credit and equity.
Will J&J be unloading more divisions? The analyst firm Leerink Swan said more sales could come and expects the company will "strategically prune" more business segments such as its slumping diabetes division (blood glucose meters and insulin pumps), with a larger focus on drugs down the line.
- read the J&J deal announcement
- here's Bloomberg's take
- check out the Rochester Business Journal's coverage
Editor's note: This story has been updated to include a perspective on the Ortho sales from Leerink Swan, and to clarify Ortho's employment situation in Rochester.