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J&J (JNJ) Accepts Platinum Equity's Offer for LifeScan Unit

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Johnson & Johnson JNJ has accepted a $2.1 billion offer from a private equity firm, Platinum Equity, for the sale of its LifeScan diabetes device unit. The company had announced the receipt of a binding offer from Platinum Equity in March.

The LifeScan unit makes blood glucose monitoring products and generated revenues of $1.5 billion last year.

J&J stock has declined 12.3% this year so far, which compares unfavorably with a decrease of 4% recorded by the industry.

The move was in line with J&J’s strategic plans for its diabetes business. The company has been planning to streamline its non-core assets since last year. As part of the streamlining efforts, J&J had announced the closing of operations at its Animas Corporation diabetes care unit in October last year. The company has arranged a deal with medical device maker, Medtronic, Inc. MDT for the transition of patients on Animas insulin pump to Medtronic pump. Meanwhile, J&J also received an offer of $2.8 billion from Fortive Corporation FTV earlier this month for its Advanced Sterilization Products business.

Moreover, sales in J&J’s Diabetes Care franchise declined 9.7% in 2017 to $1.6 billion due to price decline and competitive pressure. Thus, streamlining these assets is likely to boost margins as well cash position of the company.

Johnson & Johnson Price

 

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Zacks Rank

J&J currently carries a Zacks Rank #3 (Hold). Eli Lilly and Company LLY is a better-ranked large-cap pharma stock, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lilly’s earnings per share estimates moved up from $4.87 to $5.15 for 2018 and from $5.29 to $5.46 for 2019 in the last 60 days. Shares of the company are up 1.3% this year so far.

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