PE Firm Offers $2.1 Billion For Johnson & Johnson’s Struggling Diabetes Businesses

Consumer goods giant Johnson & Johnson has disclosed that $2.1 billion has been offered for its LifeScan division by Platinum Equity, a private equity firm. LifeScan manufactures products used in the monitoring of blood glucose. Johnson & Johnson, which is preparing to exit the market for diabetes devices, has until mid-June to make a decision.

Since 2012 sales of the diabetes device business of Johnson & Johnson, Calibra Medical Inc and Animas Corp, have been declining in a market that is highly competitive. Last year in October Johnson & Johnson indicated that it would be shutting down insulin pump maker Animas after the consumer goods giant failed to get a buyer. According to a spokesperson for Johnson & Johnson, Donna Lorenson, a strategic review of wearable insulin pump maker Calibra is ongoing.

Testing products

Some of the products LifeScan makes include personal blood glucose testing systems, testing strips and meters. Over 20 milion people spread across 90 countries use the products of LifeScan whose headquarters are located in Zug, Switzerland and Chesterbrook, Pennsylvania. According to Lorenson LifeScan has employees numbering 2,400 and they are mostly located in the United States, China and Europe.

In a statement Platinum Equity indicated that it is holding consultations with works councils responsible for representing employees. It is understood that finalization of the offer could be done by mid-June barring an extension. A deal could also be concluded before the end of this year.

Falling revenues

Last year LifeScan generated revenues amounting to around $1.5 billion. Per Steve Chesney, an analyst at Atlantic Equities, the revenue figures were disappointing though they were fair due to the fact that the division had been weighing on the growth of Johnson & Johnson for some time.

“Obviously expectations were for a higher valuation based on earlier reports, but probably closer to reality given the state of the business,” said Chesney in an interview with Reuters.

Earlier in the year reports had emerged that there were Chinese buyers who had offer to pay between $3 billion and $4 billion to acquire the diabetes units. According to Joshua Jennings the valuation of LifeScan was reasonable due to the fact that the fortunes of the business were in decline and thus the continued pricing pressure. Johnson & Johnson has also disclosed that the earnings forecast for this year that was given in January had factored in the transaction.

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