Is ConvaTec About to Get Sold?

Nancy Crotti

October 16, 2014

3 Min Read
Is ConvaTec About to Get Sold?

Rumors that ConvaTec is preparing to sell itself have erupted again, with sources telling Reuters that the Luxembourg-based company has appointed Goldman Sachs and Morgan Stanley to explore the possibility. The company may be worth up to $10 billion, the story said.

ConvaTec, which makes products for ostomy and wound care, continence and critical care, employs more than 8,000 at 11 sites and does business in more than 100 countries. It is owned by private equity firms Nordic Capital and Avista Capital Partners, whom Reuters said are preparing for a possible sale or an initial public offering of ConvaTec stock in 2015. Nordic Capital declined comment; Avista did not return a message.

Avista and Nordic acquired ConvaTec from Bristol-Myers Squibb Co. in 2011 for $4.1 billion. Reuters reported that 3M Co. was also interested in acquiring the company at the time.

Rumors of the ConvaTec sale or IPO follow a larger wave of mega-mergers in the medical device industry. Such mergers are likely spurred by the Affordable Care Act, President Obama's program of cost-cutting healthcare reforms. Medical device companies, which mostly supply hospitals, are looking for ways to drive down costs and stay competitive.

Potential suitors, also rumored to be interested last summer, include 3M and Kimberly Clark, according to the Reuters article. Kimberly Clark and 3M representatives declined to comment when contacted by Qmed.

Earlier this month, Beckton Dickinson picked off another potential suitor for ConvaTec, announcing its plans to buy CareFusion for $12.2 billion in cash and stock.

Other potential hurdles for a ConvaTec sale include a recently faltering stock market and IPO money suddenly drying up after a heady beginning in 2014.

Sources told Reuters that Kimberly Clark's and 3M's interest in ConvaTec does not hinge on a tax inversion, in which a U.S. company moves its headquarters to a country with lower taxes, thereby avoiding taxation at a U.S. rate. Medtronic's pending $43 billion acquisition of Irish company Covidien initially hinged on a tax inversion, but the Obama administration has made it harder for Medtronic to enjoy some of the tax benefits.

In late September, the U.S. Treasury Department announced it would crack down on many of the financial mechanisms--from so-called "hopscotch loans" to stock transaction mechanisms--that inverted companies use to access the overseas earnings of foreign subsidiaries of the U.S. company that inverts without paying U.S. tax. It is exactly such financial mechanisms that Medtronic was expected to use after merging with Covidien and moving its official headquarters to Ireland. Medtronic decided to continue with the $43 billion purchase anyway.

Nancy Crotti is a contributor to Qmed and MPMN.

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About the Author(s)

Nancy Crotti

Nancy Crotti is a frequent contributor to MD+DI. Reach her at [email protected].

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