Exclusive: Danaher, Blackstone pursue joint bid for J&J unit, say sources-Reuters

(Reuters) – Healthcare conglomerate Danaher Corp has teamed up with Blackstone Group LP to bid for Johnson & Johnson’s diagnostics unit, which makes blood screening equipment and laboratory blood tests and could fetch more than $4 billion, according to people familiar with the matter.

The Danaher-Blackstone consortium is competing against several private equity bidders for J&J’s Ortho Clinical Diagnostics unit, including Bain Capital LLC; Carlyle Group LP (CG.O: Quote, Profile, Research, Stock Buzz); BC Partners Ltd; and a partnership of CVC Capital Partners Ltd and Leonard Green & Partners LP, the people said.

J&J, which received preliminary offers for the division in late September, is seeking a new, interim round of bids by November 11, the people said on Thursday, asking not to be named because the matter is confidential.

Blackstone, BC Partners, Carlyle and CVC declined to comment. Representatives for J&J, Danaher, Bain and Leonard Green did not immediately respond to requests for comment.

J&J had initially hoped to fetch as much as $5 billion from selling the diagnostics unit, but potential buyers are now valuing the business closer to $4 billion, some of the people said.

Danaher and Blackstone are joining forces after squaring off in the auction of another large medical technology company more than two years ago.

Danaher acquired medical diagnostics company Beckman Coulter Inc for $5.8 billion in 2011, outbidding a consortium of Blackstone and TPG Capital LP, and substantially expanding its life sciences and diagnostics business.

There are significant synergies between Danaher and the J&J unit that could give the consortium an edge over other bidders, according to one of the people familiar with the matter.

The J&J unit for sale, which has tests that are considered older and less profitable than modern molecular diagnostics, has annual sales of about $2 billion. It makes tests that can reveal a patient’s blood type and screen for viruses like HIV and hepatitis C.

It is a small player in a market led by larger rivals such as Roche Holding AG (ROG.VX: Quote, Profile, Research, Stock Buzz), Siemens AG (SIEGn.DE: Quote, Profile, Research, Stock Buzz), Abbott Laboratories (ABT.N: Quote, Profile, Research, Stock Buzz) and Danaher.

J&J said in January it would explore strategic alternatives for the unit and cautioned that the process could take anywhere from about 12 months to 24 months. It asked JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) to run the sale of the unit, Reuters previously reported.

J&J’s decision to divest the division comes as drugmakers are shedding businesses and cutting costs in response to overseas price controls and pressure on payments from insurers and the government.

Pfizer Inc (PFE.N: Quote, Profile, Research, Stock Buzz), for instance, just spun off its animal health products business, and Abbott split off its branded drugs unit early this year.