Johnson & Johnson to Sell Advanced Sterilization Products to Fortive for $2.8 Billion

Johnson & Johnson received a binding offer to sell its Advanced Sterilization Products (ASP) business to Fortive Corporation.

The deal is valued at $2.8 billion, made up of $2.7 billion in cash from Fortive and $0.1 billion of retained net receivables.

This appears to be another action on J&J’s part to streamline its portfolio after a review of its over-the-counter drugs, diabetes care and some of its medical device products. It has reported that it was close to selling off its diabetes device unit for $2.1 billion. There has been a focus on building its drug pipeline lately. Last year it bought Actelion for $30 billion to strengthen its presence in the rare diseases market. In 2017, ASP brought in about $775 million.

Dennis Ding, an analyst with Raymond James, said, “J&J over the last couple of months has focused on managing its portfolio a little bit better to offset some of the slower growing assets,” Reuters reported. “I would think by offloading this business it should improve overall organic growth.”

Fortive is based in Everett, Washington, and it manufactures and markets medical instruments and other technologies, including GPS tracking products. In 2016, Fortive spun off from medical and industrial parts manufacturer Danaher Corp.

Fortive has 20 operating companies, including Thomson, Fluke, Hennesy, Gems Sensors & Controls and others.

J&J has 120 days from the date of the offer to accept or reject the offer, unless the two companies decide to extend it. If accepted, it is expected to close sometime in early 2019.

“As we balance the interests of all our stakeholders to deliver the greatest value to customers, healthcare providers and shareholders, we must continuously assess strategic fit and explore alternatives for our business,” said Shlomi Nachman, J&J’s Company Group Chairman, interventional Solutions and Specialty Surgery, in a statement. “ASP has a long history of pioneering infection prevention technology, and we are confident that Fortive would be well-positioned to continue to drive the business toward achieving its full potential.”

Fortive released its first-quarter finances on April 26. For the first quarter, net earnings were $261.2 million. Diluted net earnings per share were $0.74 and revenue was $1.7 billion, an increase of 13.4 percent year-over-year, with core revenue growth of 2.6 percent.

“As evidenced by our recent announcement to combine four of our Automation & Specialty businesses with Altra Industrial Motion Corp as well as the success of our acquisitions, we are committed to creating sustainable long-term value for both our customers and shareholders,” James Lico, Fortive’s president and chief executive officer, said in a statement at the time. “We’re confident that our focus on enhancing long-term value for both our customers and shareholders. We’re confident that our focus on enhancing our portfolio and pursuing high-impact growth opportunities will help us continue to build a better, stronger Fortive in 2018 and the years to come.”

In terms of the ASP acquisition, Lico said in a statement, “We are excited about today’s announcement which demonstrates the continued evolution of our portfolio towards improving growth, increasing recurring revenue, and expanding positions in attractive markets. With ASP, we expect to acquire a global leader in medical sterilization and disinfection, with a large installed base and very strong brands.”