Cardinal Health’s $6.1 billion acquisition of Patient Product Portfolio from Medtronic


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 percent 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.

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.

Goldman, Sachs & Co. and Perella Weinberg Partners LP served as Cardinal Health’s financial advisors on this transaction, and Skadden, Arps, Slate, Meagher & Flom LLP and Jones Day served as its legal advisors.

Jones Day is advising Cardinal Health on the deal with a team led by Timothy Melton (picture), Christian Fulda, Michael Ferrel, Stefan Schneider, Mauricio Paez.

Involved fees earner: Timothy Melton – Jones Day; Christian Fulda – Jones Day; Michael Ferrell – Jones Day; Stefan Schneider – Jones Day; Mauricio Paez – Jones Day;

Law Firms: Jones Day;

Clients: Cardinal Health, Inc.;

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Author: Ambrogio Visconti