Johnson & Johnson Accepts Deal to Sell Ortho-Clinical Diagnostics Unit to The Carlyle Group

NEW BRUNSWICK, NJ—Johnson and Johnson (J&J) accepted a $4.16 billion offer from global private equity firm, The Carlyle Group, on March 31, to buy one of its largest units, thereby meeting the deadline to make a deal on the very day it was set to expire.

Over a year ago J&J disclosed that it would sell its blood diagnostics division, Raritan-based Ortho-Clinical Diagnostics (OCD), which screens donated blood for infection and makes diagnostic tests for AIDS.

Drugmakers around the world are getting rid of secondary units as a way to cut costs in the face of pricing and reimbursement pressures from cash-strapped governments.

The transaction will probably close around the middle of this year, the pharmaceutical giant stated in a news release.

As New Brunswick Today reported, the Carlyle Group, a Washington, D.C.-based private equity investment firm offered $4.15 billion for the company on January 16; the announcement also stated that they would manage the business as a stand-alone company.

Carlyle will invest heavily in research and development, as well as international expansion.

“We expect to tap into rising demand for sophisticated medical diagnostic products and services worldwide,” Stephen H. Wise, managing director for The Carlyle Group, said in January.

“We have been focused on the diagnostics industry for many years given its attractive growth prospects, driven by the crucial role it plays in health care decision-making and influencing patient outcomes,” said Wise.

“We believe that OCD, with its world class employee base and talented management team, is poised for the next level of success.”

Sales have been down for the unit which reported $1.89 billion last year – roughly 2.6 percent of J&J’s revenue.

Alex Gorsky, chairman and chief executive officer of J&J, indicated the opportunity made sense.

“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,” Gorsky said in January.

“This transaction is a result of our disciplined approach to portfolio management in order to achieve the greatest value for Johnson and Johnson.”