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Bristol-Myers Squibb has kicked off the sale of ConvaTec with first round bids expected on 28 January, two sources familiar with the situation told dealReporter.
Bristol-Myers has already sent books out to prospective buyers for ConvaTec, the maker of products related to services for ostomy care, skin care and advanced wound care, said a first source, adding that up to 25 different confidentiality agreements have already been signed.
Both the first source and a second source confirmed that ConvaTec’s assets should reach a transaction value of USD 3.5bn to USD 4bn. A third source remarked that ConVatec’s EBITDA is USD 400m. The second and third source concurred that it was their understanding Morgan Staley had been retained to aid Bristol-Myers in running the process.
Private equity sponsors and company strategics are both believed to be in the fray, according to the first and second source. They both concurred that 3M would likely be among those vying for ConvaTec.
The second source said that while 3M and Johnson & Johnson (J&J) have talked about a ConvaTec buy for five years, they would not just be interested in the wound care commodities, which offer bandages and gauzes, but also in the company’s more advanced wound care used for ostomy and coloplasty patients. Still, J&J and 3M might not be interested in ostomy, as it would not be considered a core part of advanced wound care, the source noted. Advanced wound care comprises a USD 3bn market in the US, the source said.
Other companies, such as Covidien, would definitely want to be in that division, he noted. Covidien is the former healthcare division of Tyco International.
The second source said that other suitors which he had heard are involved in the process include CR Bard and Germany-based Hartmann, although the latter could be too small to make the buy, the source added. Coloplast, a Danish-based company, which is big in ostomy and womb care, as well as a number of private companies including Illinois-based Hallister, which generates roughly USD 1bn a year in the industry, Texas-based Healthpoint and DFB Pharmaceuticals, could also be interested, the source noted.
The second source said that one of the reasons he believed Bristol-Myers would want to sell the unit is to pay back some of the company’s outstanding debt. According to Bristol-Myers financials as of 30 September 2007, the company has USD 6bn in debt and USD 11bn in equity. The source added that investors would likely ask the company’s management to ramp up its research in high profile drugs.
Yet, when asked if ConvaTec would eventually sell, the first source said it is still unclear. Although ”everyone” will look, he noted that does not mean buyers will be there in the end.
Bristol-Myers spokesperson Pete Paradossi declined to comment on this report.
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