Cardinal Health Acquires J&J's Cordis For $1.94 Billion
Cardinal Health announced its acquisition of Johnson & Johnson’s (J&J’s) Cordis, a leading global manufacturer of cardiac and endovascular devices. The $1.94-billion deal is expected to be finalized at the end of 2015.
J&J has been looking to sell off Cordis since last September, due to a weak growth and a decline in sales. Rumors swirling last week pointed at a deal with Cardinal Health, though other companies had expressed interest as well.
Under the terms of the deal reported by Cardinal Health in a press release, the company will finance the acquisition with $1 billion in new senior unsecured notes and the rest with existing cash.
“While this transaction is not without obvious risks and does mark a change in Cardinal Health’s overall business mix/business model, we believe the financial attractiveness outweighs this fact,” Ross Muken, an International Strategy & Investment (ISI) analyst told Reuters.
George Barrett, chairman and CEO of Cardinal Health, expressed his enthusiasm with the acquisition and its alignment with his company’s plans for expansion and innovation in both cardiovascular devices and wound care.
Additionally, Larry Biegelsen, a Wells Fargo analyst, told Bloomberg that the company is hoping to build a generic medical device business.
“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. The acquisition of Cordis reinforces our strategic position to address this need and strengthens an important growth driver in the Cardinal Health portfolio,” said Barrett in the press release.
Don Casey, Cardinal Health’s Medical Segment CEO, who will head Cordis under the terms of the transaction, said that the expertise and talent offered by both companies were complementary and that the acquisition would allow Cardinal Health to gain a larger global foothold in the international cardiovascular market.
Though the U.S. is Cordis’ biggest single market, the press release reported that 70 percent of Cordis’ $780 million business last year was conducted internationally in over 50 different countries, including China, Japan, Germany, Italy, France, the U.K., and Brazil.
“We look forward to drawing heavily on the knowledge and innovative spirit of the Cordis team members around the world. Additionally, Cordis’ global expertise and footprint provide an exciting opportunity to leverage scale in sourcing and manufacturing,” said Casey in the press release.
When the transaction is complete, the move will finalize J&J’s exit from the cardiovascular stent market, though it will retain the drug Xarelto and its electrophysiology business, reported Reuters.