Johnson & Johnson is preparing for a potential sale of the orthopedics unit it plans to spin off, with major private equity firms already circling the deal, according to people familiar with the matter.
The business, known as DePuy Synthes, could be valued at more than $20 billion in a sale, said the people, who asked not to be identified because the information is confidential.
J&J is gathering documents and financial data from DePuy Synthes before meeting with potential buyers in the coming weeks, the sources said. Several large private equity firms are considering teaming up to potentially acquire the unit, they added.
DePuy Synthes, which makes devices used in hip and knee replacement surgeries and generated $9.3 billion in sales last year, could also attract interest from competitors in the medical device sector, these people said.
Discussions are still at an early stage and there is no guarantee they will result in a sale of the business, according to the sources. A J&J representative declined to comment.
J&J announced in October plans to separate its slower-growing orthopedics unit from the rest of the company within 18 to 24 months. At the time, Chief Financial Officer (CFO), Joseph Wolk, said that the company had not yet decided how it would carry out the spin-off, but stated that it was preparing for the possibility of a spinoff, the most time-consuming and resource-intensive approach. He said J&J was “open to ideas that others may have,” including a sale or other type of transaction, if that would result in greater value creation.
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The pharmaceutical and medical technology maker said DePuy Synthes would be the largest orthopedics company in the world if it became an independent company. Matt Henriksson, from Bloomberg Intelligenceestimated that the orthopedics unit could be valued at $28 billion, including debt.
Private equity firms have been gaining confidence to make bigger bets following what is seen as the success of Blackstone and TPG’s $18 billion acquisition of Hologic, which closed last year. Buying DePuy Synthes would allow these investors to allocate a significant amount of capital into an asset considered stable.
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