The Carlyle Group apparently sees a big future in the laboratory business. The Washington, D.C.-based asset management giant has made a $4.2 billion bid for Johnson & Johnson’s ortho-clinical diagnostics division. That division, which is based in Raritan, N.J., does not focus on laboratory testing specifically, instead distributing a testing platform known as Vitros, along with the associated reagents to perform a menu of about 120 different assays. However, it has developed a variety of assays over the decades, including standardized blood-typing tests. Its most recent new tests assist in the detection of prostate cancer. Johnson & Johnson’s diagnostics division has been hit hard in the past year. Domestic revenue was down 9.7 percent in 2013, and 8.1 percent overseas, compared to brisk growth for the rest of the company, which has posted 30 consecutive years of earnings increases. Diagnostics generated $1.9 billion in revenue last year, accounting for about 2.5 percent of overall revenues. Johnson & Johnson began exploring strategic options for the division in January of last year. Although Johnson & Johnson has yet to formally accept the offer, it appears it is moving in that direction. “Ortho-Clinical Diagnostics plays an important role in health care, and we’re […]
The Carlyle Group apparently sees a big future in the laboratory business.
The Washington, D.C.-based asset management giant has made a $4.2 billion bid for Johnson & Johnson’s ortho-clinical diagnostics division.
That division, which is based in Raritan, N.J., does not focus on laboratory testing specifically, instead distributing a testing platform known as Vitros, along with the associated reagents to perform a menu of about 120 different assays. However, it has developed a variety of assays over the decades, including standardized blood-typing tests. Its most recent new tests assist in the detection of prostate cancer.
Johnson & Johnson’s diagnostics division has been hit hard in the past year. Domestic revenue was down 9.7 percent in 2013, and 8.1 percent overseas, compared to brisk growth for the rest of the company, which has posted 30 consecutive years of earnings increases. Diagnostics generated $1.9 billion in revenue last year, accounting for about 2.5 percent of overall revenues. Johnson & Johnson began exploring strategic options for the division in January of last year.
Although Johnson & Johnson has yet to formally accept the offer, it appears it is moving in that direction.
“Ortho-Clinical Diagnostics plays an important role in health care, and we’re confident that it’s well positioned to serve the interests of its patients, customers, and employees,” said Alex Gorsky, Johnson & Johnson’s chief executive officer. “This transaction is a result of our disciplined approach to portfolio management in order to achieve the greatest value for Johnson & Johnson.”
During the company’s recent call to discuss earnings, Gorsky said that Johnson & Johnson was “very committed to working with the Carlyle Group to make sure that this transition goes as seamlessly as possible.”
The company has until March 31 to accept the offer, which is partly conditional on the acceptance of the division’s unionized workforce. If accepted, the deal is expected to close by the middle of 2014, pending antitrust review by regulators.
Takeaway: An underperforming laboratory division makes an attractive asset to another party.
