Cardinal Health (CAH) announced that it has entered into a definitive agreement to acquire Medtronic’s (MDT) Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency businesses for $6.1B in cash. The purchase price does not include cash tax benefits of at least $100M.
The acquisition is expected to be financed with a combination of $4.5B 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. T
he 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 $2.3B for the 12 months ending October 2016 with more than 70% of total sales in the U.S. Cardinal Health expects the acquisition to be accretive to non-GAAP diluted earnings per share from continuing operations by more than 21c per share in fiscal 2018, which includes approximately $100M 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 39c, 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 55c per share in fiscal 2019, and increasingly accretive thereafter. By the end of fiscal 2020, the company assumes synergies will exceed $150M 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 CEO.
