Amanda Pedersen 1

April 6, 2017

1 Min Read
Are Medtronic and Cardinal Health Close to a Deal?

Medtronic may be close to selling its medical supplies business to Cardinal Health for $6 billion, although neither company has confirmed yet that a deal is in the works.

Amanda Pedersen

Medtronic may be close to cutting a $6 billion deal with Cardinal Health for its medical supplies unit, according to multiple news sources. Although the divestiture has not yet been confirmed by either company, the latest news adds to rumors in February that Medtronic was preparing to sell the medical supplies business. At that time, however, reports indicated that the business was valued at $5 billion.

Mike Matson, an analyst at Needham & Co., said he was not surprised to hear that Medtronic is trying to sell the medical supplies business that had been part of Covidien, "given its slow growth and low margins."

Covidien's medical supplies business had sales of around $1.8 billion, and had seen minimal revenue growth in the years prior to the Medtronic-Covidien merger, Matson noted. The unit consisted of commoditized products in the nursing care, incontinence, medical surgical, and OEM product categories.

On Wednesday, the analyst said he expects Medtronic to use the proceeds of the potential sale to offset the dilution of shares. The company could also use some or all the cash for mergers and acquisitions, Matson said, "but we obviously can't predict the impact of this."

Either way, the sale should improve Medtronic's revenue growth, and operating margin, he said.

Amanda Pedersen is Qmed's news editor. Contact her at [email protected].

[Image courtesy of Pixabay]

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