Cardinal Health Ponies Up $1.944 Billion Cash for Johnson & Johnson's Cordis

Published: Mar 03, 2015

Cardinal Health (CAH) Ponies Up $1.944 Billion Cash for Johnson & Johnson (JNJ)'s Cordis (JNJ)
March 2, 2015
By Jessica Wilson, BioSpace.com Breaking News Staff

Johnson & Johnson has found a buyer for its Cordis unit, a manufacturer of cardiology and endovascular devices, which it put on the market in August 2014 . Cardinal Health has made “a binding offer” to acquire the business for $1.944 billion, Cardinal Health said in a statement released today.

When J&J put Cordis on the market in August 2014, a person with knowledge of the matter, told Bloomberg the division could fetch as much as $2 billion, so the purchase price is not a surprise.

Cordis had annual sales in 2014 of approximately $780 million, split almost evenly between cardiology and endovascular products. Cardinal, which expressed excitement about the purchase, believes the deal could yield an increase of $.20 per share by 2017 and that “synergies” between the two companies could produce $100 million annually by the end of fiscal 2018 for Cardinal’s bottom line.

Several analysts have weighed in on the deal. “While this transaction is not without obvious risks and does mark a change in CAH’s overall business mix/business model, we believe the financial attractiveness outweighs this fact,” Evercore ISI analyst Ross Muken said in a research note.

In addition, once the deal closes, Cardinal would be able to compete more effectively with powerful competitors like Abbott Laboratories , Boston Scientific and Medtronic Plc., said Larry Biegelsen, an analyst at Wells Fargo in New York, in a research note, according to Bloomberg.

Cardinal views the deal as an opportunity “to build a generic medical devices business in segments where products have become commodities,” according to Biegelsen.

“With an aging population and the accompanying demand for less invasive medical treatments, health systems around the world are searching for the best way to bring quality care to their patients in the most cost-effective way,” said Chairman and Chief Executive Officer of Cardinal Health, George Barrett. “The acquisition of Cordis reinforces our strategic position to address this need and strengthens an important growth driver in the Cardinal Health portfolio.”

Several analysts have weighed in on the deal. “While this transaction is not without obvious risks and does mark a change in CAH’s overall business mix/business model, we believe the financial attractiveness outweighs this fact,” Evercore ISI analyst Ross Muken said in a research note, according to Reuters.

Despite the fact that Johnson & Johnson , according to the Wall Street Journal, “created the roughly $5 billion global market for cardiac stents,” in 2011 the company announced it would abandon that business due to decreasing market share, reported BioSpace in August 2014. Today, Cordis produces other types of stents, catheters and minimally invasive computer imaging.

The deal, subject to regulatory approval, is expected to close by the end of 2015.

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