Panasonic Pays $1.13B For Bayer's Diabetes Business
By Jof Enriquez,
Follow me on Twitter @jofenriq
German conglomerate Bayer AG has sold its Bayer Diabetes Care (BDC) business to long-time sales and distribution partner Panasonic Healthcare Holdings, Co., Ltd. (PHCHD) for €1 billion ($1.13 billion). The announcement ends months of speculation about purchase negotiations between the two companies.
The sale, expected to close in the first quarter of 2016 pending regulatory review, includes Bayer's Contour portfolio of blood glucose monitoring meters and strips, along with the brands Breeze 2, Brio, Entrust, Elite, and Microlet lancing devices. The BDC diabetes business posted €909 million in sales in 2014.
A joint venture between Japan's Panasonic Corporation and United States-based private equity firm Kohlberg Kravis Roberts & Co. (KKR), Panasonic Healthcare was rumored to be in advanced talks to buy Bayer's diabetes unit as early as February. At that time, the unit was said to be worth between €1 and €2 billion ($2.3 billion).
“We are confident that the sale of our Diabetes Care business to our long-standing partner Panasonic Healthcare, with the strong backing of KKR, will support the long-term sustainability of this portfolio,” said Werner Baumann, CEO of Bayer HealthCare and a member of Bayer AG’s board of management, in a press release.
“For more than 20 years, our companies have shared complementary goals. We anticipate that this partnership will take our two great businesses to new heights, and we wholly welcome the BDC team as full partners to Panasonic Healthcare,” said Kenji Yamane, president of Panasonic Healthcare and Panasonic Healthcare Holdings, in the release.
Analysts believe that Bayer has been looking to sell its diabetes business for years so the company could focus on the more profitable life science and pharmaceutical markets. However, the company only formally announced that it was divesting its diabetes unit in December, in accordance with CEO Marijn Dekkers' plan to move toward a growth trajectory.
Fierce competition among manufacturers of diabetes devices, along with the continuous rise in diabetes incidence worldwide, has put more pressure on Bayer to sell BDC. Bayer found the best possible buyer in KKR-backed Panasonic Healthcare, given their long history of cooperation.
"Many country healthcare providers have instituted price reduction programs for diabetes care products. This has contributed to an increase in the volume of diabetes care products in the market at lower prices," according to a statement from KKR about the transaction. "This has contributed to an increase in the volume of diabetes care products in the market at lower prices. To navigate the environment, BDC and PHCHD together look forward to scaling their capabilities to continue providing top-quality and cost-competitive products to patients in need."
Panasonic Healthcare can use the deal with Bayer to expand global sales and distribution channels for its growing portfolio of products used by healthcare facilities. The Tokyo-based company is a market leader in Japan in its three core businesses: In Vitro Diagnostics (glucometers), Medicom (electronic health records and IT equipment), and Biomedical (CO2 incubators and ultra-low temperature freezers).