Bayer AG will sell its diabetes devices unit to Panasonic Healthcare Co., a joint venture backed by buyout firm KKR & Co., for about 1 billion euros ($1.15 billion) to exit a business hobbled by ageing products and price pressure, reports Bloomberg. The unit makes blood-glucose monitoring systems and other devices used by some of the 350 million people who live with diabetes, Leverkusen, Germany-based Bayer and Tokyo-based Panasonic Healthcare said in a statement today. Bayer Chief Executive Officer Marijn Dekkers is shedding peripheral units as he focuses on more lucrative life-sciences operations. Blood glucose monitors face competition from a new generation of products as well as increasing price pressure from governments. Bayer also plans to list its plastics unit on the stock market in coming months.
In October, the company completed a $14.2 billion acquisition of U.S. Merck & Co.’s OTC business, giving it a range of new products and wider access to the U.S. market, notes the Wall Street Journal. Bayer also announced plans last September to shed its high-tech plastics business through an initial public offering, which it has indicated it plans to float by mid-2016, at the latest. The sale of the diabetes unit could be part of a strategy by Bayer’s top management to justify the Merck acquisition, said one banking analyst who covers the company. Taken together with a potential plastics IPO, Bayer could raise between €10 billion to €15 billion, likely more than it spent to buy the Merck business, the analyst explained.
In seeking to streamline the company, Mr. Dekkers is betting on continued high sales for Bayer’s most recently launched drug portfolio—including blood thinner Xarelto and eye treatment Eylea—and the group’s ability to create new blockbuster drugs. For Panasonic, the move could help build its global distribution channel. Japanese companies are increasingly hunting abroad for acquisitions that can help them grow revenues and expand their sales and distribution channels.Panasonic Corp. sold 80% of its medical-devices business to KKR last year with the aim of expanding its global reach. Panasonic still owns 20% of Panasonic Healthcare.
Panasonic Healthcare and Bayer have cooperated extensively in the past, with Bayer marketing devices made by the health-care company, including exclusive arrangements to sell some Panasonic Healthcare products.The Bayer diabetes unit that Panasonic Healthcare is buying recorded sales of €909 million last year. Bayer had total revenues of €42.2 billion in 2014.