Jan 16 Johnson & Johnson said on
Thursday it would sell its ortho clinical diagnostics unit to
buyout firm Carlyle Group LP for $4.15 billion, shedding
a slow-growing business to focus on more lucrative products.
A major deal in the private equity world, the sale is small
change for J&J, which has a market value of $267 billion and
assets spanning pharmaceuticals, medical devices and consumer
products. Analysts said the move highlighted J&J's determination
not to waste resources on unloved divisions.
"Now with this divestiture nearly complete, we're inclined
to believe (J&J) will continue to strategically prune its
business segments and use the proceeds to return cash to
shareholders or invest in higher-growth assets," Leerink analyst
Danielle Antalffy wrote in a note.
J&J's diabetes business, which includes LifeScan blood
glucose meters and Animas pumps, could be the next business to
go, given slowing sales growth and weak margins, Antalffy said.
J&J shares were down marginally at $94.53 in afternoon
trading on the New York Stock Exchange.
Reuters reported in December that Carlyle was nearing a deal
to buy the business, trumping a joint bid from Blackstone Group
and Danaher Corp.
Carlyle was attracted to the unit's potential to grow in
emerging markets, according to a person familiar with the firm's
thinking who was not authorized to speak publicly on the matter.
Washington, D.C.-based Carlyle plans to reinvigorate the
unit's product lines, invest further in research and
development, and grow the sales force, the person added.
J&J said in January 2013 that it was considering a sale or
spinoff of the unit, whose products include equipment for
laboratory diagnostics and blood transfusion screening.
J&J's businesses typically rank first or second in their
markets. The diagnostics unit was ranked fifth among competitors
based on sales, according to Thomson Reuters data.
"This transaction is a result of our disciplined approach to
portfolio management in order to achieve the greatest value for
Johnson & Johnson," Chief Executive Alex Gorsky said in a
Drugmakers around the world are getting rid of non-core
businesses as a way to cut costs in the face of pricing and
reimbursement pressures from cash-strapped governments.
"I don't get the sense that they're going to follow the path
of a Pfizer Inc and Bristol-Myers Squibb Co and
kind of break up further. My sense is they're probably going to
do some more of this slight restructuring," Morningstar analyst
Damien Conover said.
The deal is Carlyle's biggest healthcare investment since it
bought Manor Care Inc, a nursing, hospice and home health
services provider, in 2007 for $6.3 billion.
Corporate carve-outs represent complex transactions for
private equity as the acquired units can be deeply integrated in
a parent company's finance, technology, logistics and human
Carlyle, however, has experience with such carve-outs. In
February 2013, it acquired DuPont's performance coatings
business for $4.9 billion. In December 2012 it acquired,
together with BC Partners Ltd, the former Hamilton Sundstrand
industrial products businesses of United Technologies Group
for $3.46 billion.
Carlyle, which was advised on the J&J deal by Barclays and
Goldman Sachs, said it had secured committed debt financing from
Barclays, Goldman Sachs, Credit Suisse, UBS and Nomura. Latham &
Watkins LLP acted as legal advisers to Carlyle.
JPMorgan, Cravath, Swaine & Moore LLP and Baker & McKenzie
LLP advised J&J.
The companies said the deal was expected to close in