Cardinal Health agreed to acquire Medtronic’s medical supplies business on April 18 for $6.1 billion in cash.
Cardinal Health expects the deal to close during the first quarter of the company’s fiscal year 2018, which ends on Sept. 30, 2017. The transaction, which will be financed with $4.5 billion in new debt plus cash, is subject to customary closing conditions.
The agreement includes Medtronic’s patient care, deep vein thrombosis and nutritional insufficiency businesses, which the company said generated approximately $2.4 billion in revenue during the last four quarters. Earlier this year, Bloomberg reported that the businesses' earnings before interest, taxes, depreciation and amortization were around $500 million.
As of 10:00 a.m. Eastern Time on April 18, Cardinal Health’s common stock price was down 11.08 percent to $72.76 per share. Meanwhile, Medtronic’s common stock price was up 0.19 percent to $80.51 per share.
Cardinal Health’s stock price fell after the company announced earlier in the day that its fiscal 2017 non-GAAP earnings per share (EPS) from continuing operations would be at the bottom of its previous guidance range of $5.35 to $5.50 per share. For fiscal year 2018, Cardinal Health expects its non-GAAP EPS to be flat or down mid-single digits.
If the deal closes, Medtronic expects to receive $5.5 billion after taxes, of which $1 billion will go towards incremental share repurchases in Medtronic’s fiscal year 2018. Medtronic plans on using the rest of the $4.5 billion to reduce its debt.
Cardinal Health will acquire product lines such as dental/animal health, chart paper, wound care, incontinence, electrodes, SharpSafety, thermometry, perinatal protection, blood collection, compression and enteral feeding offerings. The brands include Curity, Kendall, Dover, Argyle and Kangaroo. Cardinal Health will also receive 17 manufacturing facilities.
Medtronic acquired much of its supplies business as part of its $50 billion purchase of Covidien in 2015. The patient care, deep vein thrombosis and nutritional insufficiency businesses were part of the Patient Monitoring & Recovery division of Medtronic’s Minimally Invasive Therapies Group.
The deal expands Cardinal’s Health supplies business, which includes products that the company acquired in its purchase of Johnson & Johnson’s Cordis portfolio in 2015. The patient care, deep vein thrombosis and nutritional insufficiency businesses that Cardinal Health acquired from Medtronic will be part of Cardinal Health’s medical segment.
“Not only is this portfolio complementary to our existing suite of products, it enables us to build further scale on our established global platforms,” Don Casey, the CEO of Cardinal Health’s medical segment, said in a news release. “We are familiar with the talented team who will be joining us and have worked closely with many of them in the past. We believe this will help us execute an efficient and seamless integration after the transaction closes. These leading products perfectly complement Cardinal Health's position in a value-based world, bringing additional reach and breadth that build on our existing strengths.”