(Reuters) – Cardinal Health Inc will sell its Cordis medical device business to private equity firm Hellman & Friedman in a deal valued at about $1 billion, the drug distributor said on Friday.
The sale of the unit acquired in 2015 from Johnson & Johnson for $1.9 billion comes as drug distributors look to slim down after a rapid pace of consolidation.
Rival AmerisourceBergen Corp last year decided to shut down its compounding pharmacy business, PharMEDium, after struggling with regulatory hurdles and losses.
“This is the latest example of the drug wholesalers unwinding assets snatched up as the industry looked to consolidate over the past 5 years, with the common trend being buying high and selling lower,” Raymond James analyst Alex Ruscher said of the Cordis deal.
The unit, which makes medical devices such as catheters, stents, generates annual revenue of around $780 million and as of Feb. 1 was facing nearly 404 lawsuits related to its vena cava filters used for treating blocked arteries in lungs.
While most assets and liabilities associated with the Cordis business will be transferred to Hellman & Friedman, Cardinal Health will retain full authority for lawsuits related to inferior vena cava filters in the United States and Canada, as well as liability associated with these matters, the company said.
Cardinal Health expects a pre-tax loss of up to $120 million in the third quarter of its fiscal year 2021 after the deal closes.
“These drug distributors have made really bad acquisitions, and this Cordis was one of them…,” Morning Star analyst Soo Romanoff told Reuters. “(Cardinal) is just monetizing it because there are no synergies that they are getting from this business.”
The transaction is expected to close in the first half of Cardinal Health’s fiscal year 2022.
The company’s shares were up 2.3% at $57.04 in late morning trading.
Reporting by Manas Mishra and Mrinalika Roy in Bengaluru; Editing by Sriraj Kalluvila