UPDATED: J&J sizing up buyers for $2B Dx unit
After initially hinting months ago, Johnson & Johnson ($JNJ) appears to be making it official: The conglomerate is approaching buyers for its Ortho Clinical Diagnostics unit.
The Wall Street Journal is reporting the news, with heavy speculation as to the potential acquirer. And Reuters, citing anonymous sources, says JPMorgan Chase has been asked to run the sale. J&J's advisers have been talking with private equity firms and other health care companies that might want the Ortho business, according to the story. Such an acquisition would net the buyer blood tests that scan for everything from heart attack damage to hepatitis C and HIV, though no one is spilling the beans yet as to who might be specifically interested.
How much could the deal be worth? The division booked $2.16 billion in sales in 2012, about 3.3% of J&J's total revenue. But the WSJ article speculates a sale could pull in close to $5 billion, based on sources on the inside.
The question remains who the potential buyers might be, and no one is talking yet. But as the WSJ notes, Roche ($RHHBY), Abbott ($ABT) and Danaher ($DHR) all hold larger spots in the market space than the Ortho unit, which carries less than 5% of the sector by sales (based on Frost & Sullivan data). That's a small segment, to be sure, but Ortho operates in the hot area of in vitro diagnostics, according to the article, which is at $46 billion globally and growing between 6% and 7% annually. Perhaps another company could more successfully monetize and grow the business.
Back in January 2013, J&J CEO Alex Gorsky first spilled the beans that the company was mulling its options for the Ortho unit, including a sale or spinoff. The pressure is on, especially in the wake of the company's massive, $21 billion buyout of device maker Synthes. Gorsky must drive growth in the massive medical devices and diagnostics division that remains, which hasn't hit financial targets outside of the Synthes buy.
Editor's note: This story has been updated to include a report that JPMorgan Chase has been asked to run J&J's sale of its Ortho Clinical Diagnostics unit.