Will Medtronic Sell Its Medical Supplies Business To Cardinal Health?
Medtronic has reportedly entered into talks with Cardinal Health to negotiate the sale of its medical supplies business, which the company acquired through its 2014 purchase of Covidien. Though no agreement has been finalized, sources close to the meetings told Reuters that deal could be worth $6 billion and will be announced later this month.
The technologies purchased with Covidien have been folded into Medtronic as its Minimally Invasive Therapies Group (MITG), and Medtronic CEO Omar Ishrak commented in an earnings call that the company was evaluating which assets fit with the company’s long-term strategy. Rumors began circulating earlier this year that Medtronic may be looking to divest the legacy business and its wide range of products, including needles, catheters, and other medical instruments.
Sources told Bloomberg that Medtronic had already been approached by potential buyers, but Ishrak declined to comment on any potential sale when asked during a Q3 earnings call in February. He did note that “good portfolio management” required tough questions across the entire business.
“We look at these questions across our entire portfolio, and we will take action both in terms of divestitures and acquisitions on that basis,” said Ishrak.
Analysts from Seeking Alpha noted that the potential deal would streamline Medtronic’s portfolio moving forward, while giving Cardinal a boost to its existing medical-products business. Reuters noted that Cardinal’s medical product business has been a “bright spot” for the company during a slowdown in its pharmaceutical business.
“Certainly a part of the equation for us is how we use our balance sheet, and that may be through activities that are available external to us and the other ways that we deploy capital,” said Cardinal Health CEO George Barrett in a recent earnings call, reported Reuters.
Cardinal Health’s most recent high-profile deal was its 2015 acquisition of Cordis and its portfolio of catheters, filters, and stents. Cardinal bought Cordis from Johnson & Johnson for a reported $1.94 billion. In 2014, the company picked up Access Closure, an extravascular closure device manufacturer, in a deal worth $320 million.
Cardinal Health’s strategy moving forward — described by Barrett in an earnings call as “modernization”— is to shift the company’s focus towards at-home care and value-based reimbursement models. Moving forward, Barett says the company is “well-positioned” to face a “challenging” healthcare market.
All negotiations between Medtronic and Cardinal are still confidential, and sources warned that the two parties may not reach an agreement. If a deal is finalized, an announcement is expected later this month.