Exclusive-Carlyle in exclusive talks for $7 billion-plus Medtronic units deal-sources

By David Carnevali

NEW YORK (Reuters) - Private equity firm Carlyle Group (NASDAQ:CG) Inc has entered into exclusive negotiations to acquire a majority stake in two medical device businesses of Medtronic (NYSE:MDT) Plc at a valuation of more than $7 billion, according to people familiar with the matter.

Were an agreement to be reached in the coming weeks, it would mark the culmination of Medtronic's 12-month review of its patient monitoring and respiratory interventions businesses, that it also considered spinning off into a standalone public company.

Medtronic is seeking to streamline its portfolio and focus on its higher-growth assets, such as its heart and diabetes devices, by divesting the two units which generated approximately $2.2 billion in revenue in the 2022 fiscal year according to the company.

The businesses that Medtronic would shed would be moved to a new company majority-owned by Carlyle, the sources said. Medtronic would retain a stake in the new company of more than 35%, the sources added.

The sources cautioned that no deal is certain and requested anonymity because the matter is confidential. Medtronic and Carlyle declined to comment.

New York-listed Medtronic, which has a market value of $105 billion, makes medical devices that treat more than 70 health conditions across its cardiovascular, diabetes, medical surgical and neuroscience divisions.

The Dublin, Ireland-based company raised its annual profit forecast last month, as the return of non-urgent surgery volumes to pre-COVID-19 pandemic levels boosted demand for its medical devices.

Earlier this year, Medtronic competitor Baxter International Inc (NYSE:BAX) also embarked on a pruning of its assets to focus on growth. It said in January it would spin off its renal care and acute therapies units and in May it agreed to sell its biopharma solutions business to a private equity consortium comprising Warburg Pincus and Advent International for $4.25 billion, including debt.

Carlyle, one of the world's biggest private equity firms with $385 billion in assets under management, is a prolific investor in the healthcare sector.

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Its previous deals include primary care clinic operator One Medical, which it took public and then sold to Amazon.com Inc (NASDAQ:AMZN) for $3.9 billion last year, and Ortho Clinical Diagnostics, a medical screening business it acquired from Johnson & Johnson (NYSE:JNJ) in 2014 for $4 billion before selling it to COVID-19 test maker Quidel (NASDAQ:QDEL) Corp in a $6 billion cash-and-stock deal that was completed last year.