After months of speculation, Johnson & Johnson ($JNJ), the world's biggest maker of healthcare products, put the rumors to rest by confirming the sale of its Cordis vascular device unit to Cardinal Health ($CAH) for $1.9 billion. The deal is expected to be completed by the end of the year.
Under terms of the sale, Cardinal will pay $1.944 billion in cash, or about $1.594 billion (net of the current value of tax benefits), for Cordis, which is a leading global manufacturer of cardiology and endovascular devices, the company said in a press release. Cordis notched net revenues last year of $780 million.
It's the second major divestiture for J&J in the past 10 months as the healthcare giant looks to focus on key sectors in the industry. Last June, J&J sold its Ortho-Clinical Diagnostics unit to private equity firm The Carlyle Group for $4.2 billion.
"This initiative is part of our ongoing disciplined portfolio management approach to focus on our most promising opportunities to help patients and drive growth," Gary Pruden, chairman of J&J's Global Surgery Group, said in a release. "Cordis has made significant contributions to the field of cardiovascular care, and we believe the business has a promising future with Cardinal Health, a company with which we have a long-standing relationship."
J&J snapped up Cordis for $1.8 billion in 1996, though soon after the acquisition it began to slip behind competitors in innovation in the stent market. Cordis focuses on coronary and peripheral vascular disease, including diagnostic and interventional products such as catheters, balloons, stents, wires and vascular closure.
Even with Cordis sold off, the global powerhouse still has 11 businesses devoted to medical devices and diagnostics including BioSense Webster, as well as the troubled orthopedic and neurological focused DePuy Synthes, Janssen Diagnostics and advanced surgical care units Ethicon and Ethicon Endo-Surgery.
J&J has reported impressive revenues for its biopharma business, and has said it is working to bring medical devices up to the same level. Last year, global medical device sales for J&J were $27.5 billion, down 3.4% from the previous year. Excluding the net impact of M&A activity, including the June divestiture of Ortho Clinical Diagnostics, J&J's medical device business had underlying operational growth of 1.5%. In comparison, its pharma sales jumped 14.9% to $32.3 billion in 2014.
- read the J&J release
- see Cardinal Health's release