ConvaTec owners eye 2015 sale as buyout interest builds: sources

NEW YORK Mon Aug 18, 2014 3:45pm EDT

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NEW YORK (Reuters) - ConvaTec's private equity owners plan to explore a sale of the medical device maker next year, even as interest from several healthcare companies in a potential $10 billion acquisition intensifies, according to people familiar with the matter.

Amid a wave of mergers in the healthcare sector aimed at reducing corporate tax rates, Luxembourg-based ConvaTec has emerged as a target for U.S. companies looking to move their tax domiciles abroad in a practice known as inversion.

Diversified U.S. manufacturer 3M Co and medical equipment makers CareFusion Corp and C.R. Bard Inc are among the companies exploring a potential deal for ConvaTec, the people said.

CareFusion, with a market capitalization of $9 billion, and C.R. Bard, with $11.2 billion, would both be able to achieve an inversion if they use their own stock to pay for ConvaTec.

While ConvaTec would review any compelling offer that would come before 2015, the company for now wants to boost its value further before launching an auction or an initial public offering next year, the people said.

Still, calls from some U.S. politicians to crack down on inversions could prompt a potential buyer to act sooner rather than later, for fear missing the window of opportunity, one of the people added.

ConvaTec reported earnings before interest, tax, depreciation and amortization (EBITDA) of $502.5 million in 2013, up 15 percent year-on-year. It is hoping to exceed $600 million in EBITDA this year, the people said.

The people asked not to be identified discussing private deliberations. ConvaTec, Avista Capital, Nordic Capital, 3M, CareFusion and C.R. Bard could not be reached for comment.

ConvaTec makes wound care and ostomy care products at 11 manufacturing sites in eight countries, and sells them in more than 100 countries. It is scheduled to report its second-quarter earnings on Tuesday.

Private equity firms Avista Capital Partners and Nordic Capital acquired ConvaTec from Bristol-Myers Squibb Co in 2011 for $4.1 billion. 3M was one of the contenders for ConvaTec at the time, according to people familiar with the matter.

Inversion deals so far this year include medical device maker Medtronic Inc's acquisition of peer Covidien Plc for $42.9 billion, and drugmaker AbbVie Inc's $54.7 billion merger with pharmaceutical company Shire Plc.

(Reporting by Olivia Oran, Soyoung Kim and Greg Roumeliotis in New York; Editing by Tom Brown)

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