Carlyle Group emerges as front-runner in $7B Medtronic spinoff deal: Reuters

Carlyle Group emerges as front-runner in $7B Medtronic spinoff deal: Reuters

Nearly a year after Medtronic announced its intent to spin out its patient monitoring and respiratory interventions divisions, the business units have reportedly found a buyer.

Months’ worth of reports have detailed a range of interested parties—from fellow medtech makers Siemens Healthineers, GE HealthCare and ICU Medical to investment firms like Clayton, Dubilier & Rice—but the Carlyle Group, a private equity firm, has now taken the lead, according to a Friday report from Reuters.

Unnamed sources familiar with the matter told the outlet that Carlyle is now in exclusive negotiations to buy out the pair of businesses. The deal could reportedly weigh in above $7 billion and would allow Medtronic to retain about a one-third stake in the businesses, which would be set up as a new company with Carlyle as majority owner.

Neither Carlyle nor Medtronic commented on the reported buyout.

Investors didn’t seem to take kindly to the update on Medtronic’s planned spinoff. Shortly after Reuters’ report went live, around midday Friday, the devicemaker’s stock price began to sink.

It fell about 1.4% in the first two hours after the news broke, from just over $79 to right under $78. And while it proceeded to recover a bit of ground over the course of Friday afternoon, the stock resumed its downward drive on Monday morning, dipping down to around $77.64 within the first hour of trading.

Carlyle, too, took a negative hit from the report. Between Friday’s news drop and the first bit of trading after the weekend, the PE firm’s stock has dropped about 2%—from comfortably above the $30 mark to just below it on Monday morning.

Medtronic first announced its plans to separate out the two business units in late October 2022. At the time, it said the units—which together were responsible for about $2.2 billion in global revenues during the medtech giant’s fiscal year 2022—would be combined into a single entity and spun out into a standalone company within the next 12 to 18 months.

The spinoff plan came as Medtronic reported slowing sales in both units: The respiratory division saw declines due to supply chain shortages and reduced demand for ventilators after the peak of the COVID-19 pandemic, while the patient monitoring business was hit by dropping pulse oximeter sales—again, a casualty of pandemic-driven demands.

It wasn’t until the end of last year that the first reports emerged suggesting that the two businesses could be snatched up by another company rather than spawning into an entirely new entity. A mid-December Bloomberg report pinned Siemens Healthineers and GE HealthCare as the most interested buyers, alongside a cadre of unnamed private equity investors, in the potential $7 billion-plus deal.

Carlyle, meanwhile, wasn’t publicly named as having joined the pile-on until March of this year, when Reuters reported that ICU Medical, backed by PE investor Linden Capital Partners, had made it through to the second round of bidding, pitting it against offers from GE HealthCare and Carlyle, among others. That report suggested that the deal price could land somewhere between $8 billion and $9 billion.

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