Johnson & Johnson Selling LifeScan Unit for $2.1 Billion

Platinum Equity submitted a binding offer to Johnson & Johnson Family of Companies to buy LifeScan, Inc. for $2.1 billion. LifeScan manufactures and markets blood glucose monitoring products for the diabetes market.

Based in Los Angeles, Platinum Equity is a global investment company founded in 1995. It has $13 billion in assets under management and a portfolio of more than 30 operating companies. Its current fund is Platinum Equity Capital Partners IV, a $6.5 billion global buyout fund. It was founded by Tom Gores, who is also owner of the Detroit Pistons basketball team.

The diabetes market is struggling in general these days, largely because of increased competition and downward pressure on payer reimbursements in the U.S. J&J’s diabetes revenue has been dropping since 2012, with sales sliding 7.7 percent year-on-year in the first nine months of 2017.

J&J’s diabetes care business include Animas Corporation and Calibra Medical Inc., as well as LifeScan. In October, J&J indicated it had plans to close the North American operations of Animas after it couldn’t find a buyer. In January, Reuters reported that bidders in China had expressed interest in J&J’s diabetes care companies, willing to pay up to $4 billion. Although the Platinum offer is not finalized, it does appear to be the leader, with participation from J&J in the talks and dual announcements.

LifeScan generated $1.5 billion in revenue last year, what is generally considered a disappointing year. Steve Chesney, an analyst with Atlantic Equities, told Reuters,"Obviously, expectations were for a higher valuation based on earlier reports, but probably closer to reality given the state of the business."

J&J has a deadline for the offer of June 15, unless Platinum Equity chooses to extend it. If it’s accepted, it’s expected to close by the end of the year.

"We have great respect for Johnson & Johnson and appreciate their confidence in our ability to execute," said Tom Gores, chairman and chief executive officer of Platinum Equity, in a statement. "This is an important investment for us in a business that serves millions of patients around the world. We are committed to putting our financial resources and global operating expertise to work in support of the company’s core mission to improve the quality of life for people living with diabetes."

LifeScan is headquartered in Chesterbrook, Pennsylvania and Zug, Switzerland. Its blood glucose monitoring systems are marketed under the brand name OneTouch, and includes meters, test strips, lancets, point-of-care testing systems, and digital solutions.

If the deal is accepted, the company’s current president, Valerie Asbury, would likely continue in that role.

"LifeScan has been a leader in diabetes care for more than 30 years and has consistently developed and brought to market industry leading products," said Jacob Kotzubei, Platinum Equity Partner, in a statement. "We have worked closely with Johnson & Johnson to craft a divestiture solution for LifeScan that would create a global standalone business and set the stage for continued investment in growth and innovation. Once our offer is accepted we will work with the management team to ensure a seamless transition on behalf of patients, healthcare providers and the company’s employees around the world."

Typically, when venture firms acquire companies, especially struggling companies, they take over and restructure, often making staffing cuts. Platinum Equity’s trademarked strategy is dubbed M&A&O, for mergers, acquisitions and operations. Platinum’s businesses range from manufacturing, distribution, transportation and logistics, to equipment rental, metals services, media and entertainment, technology and telecommunications.

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