Dive Brief:

• The private equity firm Carlyle Group is leading the race to buy Medtronic’s connected patient monitoring and respiratory care operations, according to Reuters.
• Medtronic outlined plans to spin off the units almost one year ago. At the time, the company proposed creating a new connected care company, but the move reportedly led to interest from potential buyers including Siemens Healthineers and GE HealthCare.
• Now, with Medtronic nearing the end of its targeted window for completing a transaction, Reuters has reported that Carlyle has entered into exclusive negotiations to buy a majority stake in the two businesses at a valuation of more than $7 billion.

Dive Insight:

Patient monitoring and respiratory interventions, part of Medtronic’s Medical Surgical portfolio, are among the slower-growing parts of the company. While neither business has the type of growth profile that Medtronic is targeting, they could be attractive to another company.

According to Reuters, Carlyle is now in exclusive negotiations with Medtronic. The report, which is based on anonymous sources, states that the private equity group is discussing a deal that would give it a 65% stake at a valuation of more than $7 billion. Medtronic would retain the remaining 35% stake in the new company created through the spinoff.

A Medtronic spokesperson declined to comment on the report, citing company policy about rumors or speculation.

Working with a private equity group to create a new standalone company would free Medtronic from the need to hold an initial public offering (IPO) at a tricky time in the public markets. Shares in Johnson & Johnson’s consumer health spinoff Kenvue have fallen 24% since the new company went public in May. 

Carlyle could exit the company in the future by holding an IPO when conditions are more favorable, or find a strategic buyer for the business. The private equity group has used both approaches in healthcare in recent years, taking One Medical public before organizing a strategic sale and selling Ortho Clinical Diagnostics to Quidel.