J&J looks to sell off Cordis for as much as $2B
Johnson & Johnson ($JNJ) is reportedly seeking a buyer for its Cordis unit, which is focused on vascular medical devices. This would be the second major divestiture for the conglomerate this year, it sold Ortho-Clinical Diagnostics to private equity firm The Carlyle Group in June for $4.2 billion.
According to The Wall Street Journal, a sale process for Cordis is at an early stage and it could go for $1.5 billion to $2 billion to a private equity or strategic buyer.
Cordis is based in Bridgewater, NJ, and has about 5,000 employees. The division is Johnson & Johnson's vascular disease unit and it includes 5 subsidiaries: cardiovascular disease management; peripheral vascular and biliary obstructive disease treatments; controlled vascular drug delivery technology; electrophysiology and medical sensor technology used in cardiovascular procedures; and biologics delivery systems.
J&J said three years ago it wanted to get out of the stent business, notes the WSJ. But cardiovascular care was its top-performing business during the first half of this year, with $1.1 billion in revenue that was up 6.3% from the same period a year earlier. That growth was driven by the BioSense Webster business, which is the Cordis unit that sells electrophysiology and medical sensor technology used in cardiovascular procedures. BioSense Webster gained 14% during the second quarter due to new catheter launches and continued market expansion.
In 1996, J&J acquired Cordis for $1.8 billion. But after acquiring the company, it was unable to keep up the pace of innovation and slipped in the race to create the stent market.
Even if it were to sell-off Cordis, the conglomerate would still have 11 businesses devoted to medical devices and diagnostics including the troubled orthopedic and neurological focused DePuy Synthes, Janssen Diagnostics and advanced surgical care units Ethicon and Ethicon Endo-Surgery.
J&J had $14.3 billion in medical device and diagnostic sales during the first half, a gain of only 0.3%. Diabetes care and diagnostics were the worst performing segments; they declined 10% and 5.8%, respectively.
If a Cordis deal would come to fruition, it would only be the latest in a string of M&A activity that includes Zimmer's purchase of Biomet for more than $13 billion, Medtronic's ($MDT) $43 billion Covidien ($COV) buy and Endo's anticipated sale of its medical device business.
J&J was flat in early trading on the news, but has gained 13% thus far this year.
- here is the WSJ story
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