DUBLIN, Ohio, April 18, 2017 /PRNewswire/ -- Cardinal
Health (NYSE: CAH) today announced that it has entered into a
definitive agreement to acquire Medtronic's Patient Care, Deep Vein
Thrombosis and Nutritional Insufficiency businesses for
$6.1 billion in cash. The purchase
price does not include cash tax benefits of at least $100 million. The acquisition is expected to be
financed with a combination of $4.5
billion 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.
The 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 $2.3 billion for
the 12 months ending October 2016
with more than 70 percent of total sales in the U.S.
Cardinal Health expects the acquisition to be accretive to
non-GAAP1 diluted earnings per share from continuing
operations by more than $0.21 per share in fiscal 2018,
which includes approximately $100
million 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 $0.39, 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 $0.55 per share in
fiscal 2019, and increasingly accretive thereafter. By the end of
fiscal 2020, the company assumes synergies will exceed $150
million annually.
"We are thrilled about today's announcement, as this
well-established product line is complementary to our medical
consumables business and fits naturally into our customer offering.
For this reason, this product portfolio has been on our radar for
many years," said George S. Barrett,
Cardinal Health chairman and CEO. "We distribute some of these
products today and have been collaborative partners with the
leadership of this business. Given the current trends in
healthcare, including aging demographics and a focus on post-acute
care, this industry-leading portfolio will help us further expand
our scope in the operating room, in long-term care facilities and
in home healthcare, reaching customers across the entire continuum
of care.
"We're also looking forward to welcoming the more than 10,000
employees across these businesses who share our dedication to
serving customers and their patients by providing high-quality
products and services."
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 chief
executive officer.
"Not only is this portfolio complementary to our existing suite
of products, it enables us to build further scale on our
established global platforms," said Casey. "We are familiar with
the talented team who will be joining us and have worked closely
with many of them in the past. We believe this will help us execute
an efficient and seamless integration after the transaction closes.
These leading products perfectly complement Cardinal Health's
position in a value-based world, bringing additional reach and
breadth that build on our existing strengths."
Cardinal Health plans to issue long-term debt to finance the
transaction and has obtained a commitment letter from Goldman Sachs
Bank USA and Goldman Sachs Lending
Partners LLC to provide a $4.5
billion unsecured bridge loan.
Goldman, Sachs & Co. and Perella Weinberg Partners LP served
as Cardinal Health's financial advisors on this transaction, and
Skadden, Arps, Slate, Meagher & Flom LLP and Jones Day served as its legal advisors.
For more information on the acquisition, visit the Investor
Relations page at ir.cardinalhealth.com.
Conference Call
Please also reference an additional release issued today by
Cardinal Health entitled, "Cardinal Health updates fiscal 2017
guidance; provides early outlook for future fiscal years."
Cardinal Health will host a webcast and a conference call today
at 8:30 a.m. Eastern to discuss both
of today's announcements. To access the call and corresponding
slide presentation, go to the Investor Relations page at
ir.cardinalhealth.com. The call also can be accessed by dialing
913-312-1502, passcode #2495375. There is no pre-registration for
the call; however, participants are advised to dial into the call
at least 10 minutes prior to the start time.
Presentation slides and an audio replay will be archived on the
website after the conclusion of the meeting. The audio replay will
be available until Tuesday, April 25
at 12 p.m. Eastern at 719-457-0820,
passcode #2495375.
Non-GAAP financial measures (including footnote)
Footnote (1) Expected accretion to non-GAAP diluted earnings per
share from continuing operations reflects: (A) earnings from
continuing operations, excluding (1) LIFO charges/(credits), (2)
restructuring and employee severance, (3) amortization and
acquisition-related costs, (4) impairments and (gain)/loss on
disposal of assets, (5) litigation (recoveries)/charges, net, and
(6) loss on extinguishment of debt, each net of tax, (B) divided by
diluted weighted average shares outstanding.
Cardinal Health presents non-GAAP diluted earnings per share
from continuing operations on a forward-looking basis. The most
directly comparable forward-looking GAAP measure is diluted
earnings per share from continuing operations. Cardinal Health is
unable to provide a quantitative reconciliation of this
forward-looking non-GAAP measure to the most directly comparable
forward-looking GAAP measure, because Cardinal Health cannot
reliably forecast LIFO charges/(credits), restructuring and
employee severance, amortization and acquisition-related costs
(which Cardinal Health expects to increase significantly as a
result of the acquisition of the Patient Care, Deep Vein Thrombosis
and Nutritional Insufficiency businesses), impairments and
(gain)/loss on disposal of assets and litigation
(recoveries)/charges, net, which are difficult to predict and
estimate. Please note that the unavailable reconciling items could
significantly impact Cardinal Health's future financial results.
These items could cause earnings per share and the accretion to
earnings per share to differ materially from the company's non-GAAP
expectations.
About Cardinal Health
Cardinal Health Inc. is a global, integrated healthcare services
and products company, providing customized solutions for hospitals,
healthcare systems, pharmacies, ambulatory surgery centers,
clinical laboratories and physician offices worldwide. The company
provides clinically proven medical products and pharmaceuticals and
cost-effective solutions that enhance supply chain efficiency.
Cardinal Health connects patients, providers, payers, pharmacists
and manufacturers for integrated care coordination and better
patient management. Backed by nearly 100 years of experience, with
more than 40,000 employees in nearly 60 countries, Cardinal Health
ranks among the top 25 on the Fortune 500. For more
information, visit cardinalhealth.com, follow @CardinalHealth on
Twitter and connect on LinkedIn at
linkedin.com/company/cardinal-health.
Cautions Concerning Forward-Looking Statements
This release contains forward-looking statements addressing
Cardinal Health's plans to acquire Medtronic's Patient Care, Deep
Vein Thrombosis and Nutritional Insufficiency businesses and other
statements about future expectations, prospects, estimates and
other matters that are dependent upon future events or
developments. These statements may be identified by words such as
"expect," "anticipate," "intend," "plan," "believe," "will,"
"should," "could," "would," "project," "continue," "likely," and
similar expressions, and include statements reflecting future
results, trends or guidance, statements of outlook and expense
accruals. These matters are subject to risks and uncertainties that
could cause actual results to differ materially from those
projected, anticipated or implied. These risks and uncertainties
include: the ability to successfully complete the acquisition of
the Patient Care, Deep Vein Thrombosis and Nutritional
Insufficiency businesses on a timely basis, including receipt of
required regulatory approvals and satisfaction of other conditions;
the conditions of the credit markets and the company's ability to
issue debt to fund the acquisition on acceptable terms; if the
acquisition of the Patient Care, Deep Vein Thrombosis and
Nutritional Insufficiency businesses is completed, the ability to
retain the acquired businesses' customers and employees, the
ability to successfully integrate the acquired businesses into
Cardinal Health's operations, and the ability to achieve the
expected synergies as well as accretion in earnings; competitive
pressures in Cardinal Health's various lines of business; the
amount or rate of generic and branded pharmaceutical price
appreciation or deflation and the timing of and benefit from
generic pharmaceutical introductions; the ability to maintain the
benefits from the generic sourcing venture with CVS Health; the
risk of non-renewal or a default under one or more key customer or
supplier arrangements or changes to the terms of or level of
purchases under those arrangements; uncertainties due to government
health care reform including proposals to modify or repeal the
Affordable Care Act; uncertainties with respect to U.S. tax or
trade laws, including proposals relating to a "border adjustment
tax" or new import tariffs; changes in the distribution patterns or
reimbursement rates for health care products and services; the
effects of any investigation or action by any regulatory authority;
and changes in foreign currency rates and the cost of commodities
such as oil-based resins, cotton, latex and diesel fuel. Cardinal
Health is subject to additional risks and uncertainties described
in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and
exhibits to those reports. This release reflects management's views
as of April 18, 2017. Except to the
extent required by applicable law, Cardinal Health undertakes no
obligation to update or revise any forward-looking
statement.
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SOURCE Cardinal Health