Cardinal Health to acquire Medtronic Patient Product Portfolio
Cardinal Health has entered into a definitive agreement to acquire Medtronic's Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency businesses for $6.1 billion in cash. The purchase price does not include cash tax benefits of at least $100 million. The acquisition is expected to be financed with a combination of $4.5 billion in new senior unsecured notes and existing cash. The transaction is expected to close in the first quarter of Cardinal Health's fiscal year 2018, subject to customary closing conditions, including regulatory clearances.
The Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency businesses encompass 23 product categories across multiple market settings, including numerous industry-leading brands, such as Curity, Kendall, Dover, Argyle and Kangaroo, which are used in nearly every U.S. hospital. Total revenues for the businesses were $2.3 billion for the 12 months ending October 2016 with more than 70% of total sales in the U.S.
Cardinal Health expects the acquisition to be accretive to non-GAAP1 diluted earnings per share from continuing operations by more than $0.21 per share in fiscal 2018, which includes approximately $100 million of inventory step-up costs during the first few quarters following closing. This is net of estimated incremental annual financing-related interest expense of up to $0.39, subject to change based on the company's ultimate bond pricing and tax rate. The company expects the acquisition to be accretive to non-GAAP diluted earnings per share by more than $0.55 per share in fiscal 2019, and increasingly accretive thereafter. By the end of fiscal 2020, the company assumes synergies will exceed $150 million annually.
"We are thrilled about today's announcement, as this well-established product line is complementary to our medical consumables business and fits naturally into our customer offering. For this reason, this product portfolio has been on our radar for many years," said George S. Barrett, Cardinal Health chairman and CEO. "We distribute some of these products today and have been collaborative partners with the leadership of this business. Given the current trends in healthcare, including aging demographics and a focus on post-acute care, this industry-leading portfolio will help us further expand our scope in the operating room, in long-term care facilities and in home healthcare, reaching customers across the entire continuum of care.
"We're also looking forward to welcoming the more than 10,000 employees across these businesses who share our dedication to serving customers and their patients by providing high-quality products and services."
Once the transaction is complete, the Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency businesses will become part of Cardinal Health's Medical segment, which is led by Don Casey, the segment's chief executive officer.
"Not only is this portfolio complementary to our existing suite of products, it enables us to build further scale on our established global platforms," said Casey. "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."