Cardinal Health plans to buy Johnson & Johnson's cardiology medical-device business Cordis for nearly $2 billion in cash, marking the company's expansion into the interventional vascular technology market.
The Dublin, Ohio-based pharmaceutical and medical products distributor announced the $1.94 billion deal Monday. The deal's price will total roughly $1.5 billion when including tax benefits.
Shares of Cardinal Health rose $1.40 during early Monday trading to reach $89.38, nearing their 52-week high of $90.49. The company projected the purchase will increase its earnings by 20 cents a share in fiscal 2017.
“We are extremely excited about the acquisition of Cordis,” George Barrett, chairman and CEO of Cardinal, said in a statement. “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.”
The purchase marks the departure of Johnson & Johnson from the cardiovascular stent business, a move that enables the company to focus on other areas that offer greater opportunities for growth, according to J&J spokeswoman Amy Jo Meyer.
“Johnson & Johnson's approach is to focus on being No. 1 or No. 2 in a particular area, as well as on those businesses or product areas that have a clear path to achieving this leadership position, or that will be directly complementary to one of our businesses,” Meyer said in an e-mail statement. “We believe this initiative will position Cordis for future growth, while enabling Johnson & Johnson to better focus on other opportunities in its portfolio where it can help patients and drive growth.”
Headquartered in Fremont, Calif., Cordis had annual sales in 2014 of approximately $780 million, with 70% of its sales coming from outside the U.S. The deal is expected to be finalized by the end of 2015.
Johnson & Johnson still retains its other cardiovascular disease ventures, including its electrophysiology business, Biosense Webster, as well as its heart drug Xarelto.
“This initiative is part of our ongoing disciplined portfolio management approach to focus on our most promising opportunities to help patients and drive growth,” Gary Pruden, worldwide chairman of J&J's Global Surgery Group, said in a written statement.
“Cordis has made significant contributions to the field of cardiovascular care, and we believe the business has a promising future with Cardinal Health, a company with which we have a longstanding relationship,” he said.
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