Cardinal Health to buy Medtronic units for $6.1bn
Tullamore medical supplies plant with 350 staff among those under new ownership
Cardinal Health is acquiring Medtronic’s patient care, deep vein thrombosis and nutritional insufficiency units. (Photograph: Munshi Ahmed/Bloomberg)
Healthcare giant Medtronic has sold it medical supplies business to rival Cardinal Health.
Medtronic’s Tullamore plant will be one of 17 company facilities changing hands as a result of the $6.1 billion (€5.7 billion) deal. The company currently employs about 350 staff, including contractors, at the Tullamore plant following a restructuring last year. Staff were being briefed on Tuesday about the transaction.
The medical supplies business was a legacy operation of Covidien, which was acquired by Medtronic for $49.9 billion (€47 billion) in January 2015 in a move which gave the world’s largest medical device maker Irish domicile.
The business sells everything from needles and catheters to monitoring equipment and medical instruments. Cardinal, based in Dublin, Ohio, said in a statement it was acquiring the patient care, deep vein thrombosis and nutritional insufficiency units from Medtronic.
It said the businesses accounted for 23 product categories with sales across global markets. The US company already has a strong medical products division. Medtronic said the units being sold had reported sales of $2.4 billion over the past year.
The sale marks the culmination of a process which began at the start of the year. Cardinal had been considered the front-runner for the business since bids were submitted last month and had been in exclusive talks with Medtronic for the last couple of weeks. The price agreed is ahead of earlier projections, which were in the region of $5 billion.
Following the sale, Medtronic will continue to employ more than 3,500 people in Ireland, with plants in Galway, Athlone and Dublin, the company said.
“This is a positive transaction for all involved – Medtronic, Cardinal Health, and our respective shareholders and employees – who we believe will all thrive under this change in ownership,” said Omar Ishrak, Medtronic chairman and chief executive.
“In addition, it signifies our commitment to disciplined portfolio management. Ultimately, we came to the conclusion that these products – while truly meaningful to patients in need – are best suited under ownership that can provide the investment and focus that these businesses require.”
Cardinal Health said it would finance the acquisition with cash and $4.5 billion in new debt. The company had previously planned a major investment in Longford promising 1,300 jobs on a greenfield site but the project was pulled in early 2004.
The most recent accounts for the Tullamore plant, Covidien Ireland Limited, showed profits before tax of €2.8 million for the year to end-April 2016. That was barely ahead of the €2.4 million reported for the previous seven months.
The facility, which supplies other Medtronic businesses in Europe, reported sales of €44.5 million, compared to €26.4 in the previous seven months. However, the company reported that it had lost a contract supplying a sister business.
That led to a restructuring to “right size” the business which had employed 435 people at that stage. The company incurred costs of €800 million in connection with the redundancy programme.
Cardinal Health is the fifth international medical devices group to operate the Tullamore site. It was opened in 1982 by US-based Sherwood Medical before being acquired by Tyco Healthcare.
That company became Covidien following the break-up of the Tyco conglomerate in 2007. Covidien was then acquired by Medtronic and now has spun off the business to Cardinal Heath.
Cardinal Health’s medical products unit has been a bright spot and the company said earlier this month that it is on track to reach mid- to high-single-digit revenue growth, at a time when investors have become more anxious about its drug distribution business.
In 2015, Cardinal Health acquired Cordis from Johnson & Johnson for around $2 billion, adding a portfolio of devices, including catheters, filters and stents.
– (Additional reporting Bloomberg)