(Reuters) – Carlyle Group LP and a consortium of Danaher Corp and Blackstone Group LP have advanced to the final stage of negotiations for Johnson & Johnson’s diagnostics unit, according to people familiar with the matter.
These two bidders appear willing to pay the most for the unit, Ortho Clinical Diagnostics, though a deal may now value it at up to $4 billion, less than the $5 billion J&J was initially hoping for, the people said on Thursday.
Other private equity firms, including Bain Capital LLC, BC Partners Ltd and a consortium of CVC Capital Partners Ltd and Leonard Green & Partners LP, considered the valuation too high given the unit’s lack of growth and are no longer in talks with J&J, the people added.
The people spoke on condition of anonymity because the sale process is confidential. J&J and Danaher did not respond to requests for comment. Carlyle, Blackstone, Bain, BC Partners, CVC and Leonard Green declined to comment.
The diagnostics unit makes blood screening equipment and laboratory blood tests that are considered older and less profitable than modern molecular diagnostics. It also makes tests that can reveal a patient’s blood type and screen for viruses such as HIV and hepatitis C.
It is a small player in a market led by larger rivals such as Roche Holding AG, Siemens AG, Abbott Laboratories and Danaher.
J&J said in January it would explore strategic alternatives for the unit and cautioned that the process could take anywhere from 12 months to 24 months.
It asked JPMorgan Chase & Co 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, for instance, recently spun off its animal health products business, and Abbott split off its branded drugs unit early this year.