March 2, 2015 — Cardinal Health announced plans to acquire Johnson & Johnson’s Cordis business, a leading global manufacturer of cardiology and endovascular devices, for $1.94 billion in cash.
Headquartered in Fremont, Calif., Cordis had annual sales in 2014 of approximately $780 million, split almost evenly between cardiology and endovascular products. Cordis is a global company with a growing portfolio of products serving healthcare systems throughout the world. While the U.S. is the largest single market, 70 percent of total sales come from outside the United States. Cordis’ international presence includes operations in more than 50 countries, including China, Japan, Germany, Italy, France, the United Kingdom and Brazil.
“We are extremely excited about the acquisition of Cordis. This is a significant step forward in our cardiovascular strategy. Cordis brings with it a long and proud legacy of cardiovascular innovation. This move highlights our commitment to address a major pain point in healthcare systems through innovative new approaches to the management of physician preference items.
"This acquisition follows a sequence of strategic moves for Cardinal Health in the areas of cardiology, wound management and orthopedics. We are well-positioned to help customers standardize around mature medical devices, while bringing them innovative solutions around supply chain management, inventory optimization, and work flow tools and data to support the most effective management of the patient,” said George Barrett, chairman and CEO.
“With an aging population and the accompanying demand for less invasive medical treatments, health systems around the world are searching for the best way to bring quality care to their patients in the most cost-effective way. The acquisition of Cordis reinforces our strategic position to address this need and strengthens an important growth driver in the Cardinal Health portfolio,” Barrett continued. Once the transaction is complete, the business will report to Don Casey, Cardinal Health’s Medical Segment chief executive officer and a medical device industry veteran.
Casey noted that Cardinal Health and Cordis have complementary skills and expertise, creating a combined talent base that will be world class in cardiovascular solutions. “We look forward to drawing heavily on the knowledge and innovative spirit of Cordis team members around the world. Additionally, Cordis’ global expertise and footprint provide an exciting opportunity to leverage scale in sourcing and manufacturing,” said Casey.
Proposed Acquisition Details
Cardinal Health has made a binding offer to acquire Johnson & Johnson’s Cordis business for $1.94 billion in cash. The information and consultation process with the employees’ representative bodies in applicable jurisdictions, including France and Germany, is under way.
The acquisition is expected to be financed with a combination of $1 billion in new senior unsecured notes and the remainder with existing cash. The transaction is expected to close in the United States and key non-U.S. countries toward the end of calendar 2015. Assuming this timing, Cardinal Health expects fiscal 2017 accretion in non-GAAP diluted earnings per share (EPS) from continuing operations of greater than $0.20 per share, which includes the cost of an incremental $0.07-$0.08 per share of interest expense associated with financing the transaction. The company expects the acquisition to be increasingly accretive thereafter and assumes that synergies will exceed $100 million annually by the end of fiscal 2018.
Upon completion of that process, Cardinal Health expects to enter into a definitive purchase and sale agreement in respect of the proposed acquisition. The proposed transaction will also be subject to customary closing conditions, including regulatory approvals, and is expected to close in the approximately 20 principal countries towards the end of calendar year 2015 and in the remaining countries on a rolling basis afterward.
Cardinal Health has obtained a commitment letter from Goldman Sachs Bank USA for a new $1 billion unsecured bridge loan in connection with the planned acquisition. The company plans to issue long-term debt prior to the transaction closing later this calendar year and terminate the bridge loan.
Wachtell, Lipton, Rosen and Katz and Jones Day served as legal advisors, and Goldman, Sachs and Co. served as Cardinal Health’s financial advisor on this transaction.
For more information: ir.cardinalhealth.com