Cardinal Health Inc 8-K, filed Mar 12, 2021
Cardinal Health Inc (CAH)
8-K
2021-03-12
For: 2021-03-12
View Original
Added on
April 10, 2026
About this 8-K
Cardinal Health Inc filed this 8-K on March 12, 2021.
Items reported
- Item 2.05: Exit or restructuring costs
- Item 2.06: Material impairment
- Item 7.01: Regulation FD disclosure
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 12, 2021
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||||||||||||||||||||
(614 ) 757-5000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. p
Item 2.05: Costs Associated with Exit or Disposal Activities
On March 12, 2021, Cardinal Health, Inc. (the “Company”) entered into a definitive agreement to sell its Cordis business (the “planned divestiture”). In connection with the planned divestiture, the Company has been authorized to incur costs associated with exit or disposal activities of up to $125 million. The Company expects to record these charges in the Restructuring and employee severance line item in its statement of earnings primarily during its fiscal years 2021 and 2022. The Company expects these charges to consist of approximately $83 million of professional, project management and other service fees to support the planned divestiture; $19 million of employee-related costs; and additional expenses from facility exits and other restructuring activities. The Company expects the majority of these costs to result in future cash expenditures. All of the estimates described in Item 2.05 of this Form 8-K may change in the future.
Item 2.06: Material Impairment
In connection with the entry into the definitive agreement described above in Item 2.05, in the quarter ended March 31, 2021, the Company will classify the Cordis business as held for sale and will write down the net assets being sold to fair value less costs to sell, which the Company expects will result in a pre-tax loss not in excess of $120 million. The Company does not anticipate that this charge will result in future cash expenditures. All of the estimates described in Item 2.06 of this Form 8-K may change in the future.
Item 7.01: Regulation FD Disclosure
The news release announcing the planned divestiture discussed above in Item 2.05 is being furnished as Exhibit 99.1 to this Form 8-K and additional information posted on the Company’s Investor Relations website is being furnished as Exhibit 99.2.
Item 8.01: Other Events
On February 26, 2021, the Company received a subpoena from the U.S. Securities and Exchange Commission requesting the production of documents from 2015 through 2019 relating to inventory in the Cordis business, analysis of goodwill of the Medical segment and other matters. The Company is cooperating with the SEC’s inquiry and cannot predict its duration or outcome.
Item 9.01: Financial Statements and Exhibits
(d) Exhibits
| Exhibit Number | Exhibit Description | ||||
| 99.1 | |||||
| 99.2 | |||||
Cautions Concerning Forward-Looking Statements
This Form 8-K contains forward-looking statements addressing Cardinal Health's plans to divest the Cordis business and the financial impact to Cardinal Health resulting therefrom, as well as other statements about future expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results, trends or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include: the ability to successfully complete the divestiture of the Cordis business on a timely basis, including receipt of required regulatory approvals and satisfaction of other conditions; the risk that the costs associated with exit or disposal activities could ultimately be greater than we currently expect; the risk that impairment of the transferred assets could ultimately be greater than we currently expect; and the possibility that the divestiture could result in an impairment of our remaining Medical unit goodwill. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This release reflects management's views as of March 12, 2021. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Cardinal Health, Inc. | |||||||||||
| (Registrant) | |||||||||||
| Date: | March 12, 2021 | By: | /s/ JASON M. HOLLAR | ||||||||
| Jason M. Hollar | |||||||||||
| Chief Financial Officer | |||||||||||
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Exhibit 99.1
FOR IMMEDIATE RELEASE
Cardinal Health signs definitive agreement to sell its Cordis business to Hellman & Friedman
DUBLIN, OHIO – March 12, 2021 — Cardinal Health (NYSE: CAH) today announced that it has signed a definitive agreement to sell its Cordis business to Hellman & Friedman (H&F) for approximately $1 billion, which includes buyer’s assumption of certain liabilities and seller’s retention of certain working capital accounts. The transaction is expected to close in the first half of Cardinal Health’s fiscal year 2022, subject to customary closing conditions and regulatory clearances.
“Cordis has a long history of innovation in minimally-invasive cardiovascular technology, and we are confident that with H&F as its owner, Cordis will be well-positioned for growth, innovation and success,” said Mike Kaufmann, CEO of Cardinal Health. “Cardinal Health and H&F have a shared passion for delivering high-quality medical products to customers and we are excited about the future for the Cordis business under H&F’s ownership.”
“Our decision to divest Cordis demonstrates our disciplined approach to evaluating our portfolio and focusing our resources in our strategic growth areas where we are an advantaged owner,” Kaufmann continued. “Looking forward, we remain committed to our medical distribution and global medical products businesses.”
“Cordis is an excellent fit with our philosophy of investing in great businesses as a market-leading cardiovascular device manufacturer known for high-quality products, strong physician satisfaction and superb patient outcomes,” said Hunter Philbrick, Partner at H&F. “We are excited to invest in the talented Cordis, Ajax and Zeus teams to drive industry leadership, therapeutic innovation and improved patient experiences.”
“We at Ajax Health and Zeus Health are ecstatic about injecting growth into Cordis’ powerful platform, and will do so through investments in the core business and through an independent R&D engine – the ‘Cordis Accelerator’ – to develop and commercialize a new pipeline of products exclusively for Cordis,” said Duke Rohlen, CEO of Ajax Health and Zeus Health, partners to H&F in the transaction, and Executive Chairman-designate of Cordis and CEO of Cordis Accelerator. “We see an unparalleled opportunity to partner with both existing Cordis leadership and H&F to combine a best-in-class innovation engine with a strong and robust commercial chassis. Together, we will establish Cordis as the standard bearer for medical device innovation.”
After closing, most assets and liabilities associated with the Cordis business will transfer to H&F. Cardinal Health will retain full authority for lawsuits related to inferior vena cava filters in the United States and Canada, as well as liability associated with these matters. Cardinal Health estimates that, after completion of the transition services agreement, the divestiture of the Cordis business will decrease Medical segment profit by approximately $60 million to $70 million on an annual run-rate basis.
In connection with the entry into this definitive agreement, Cardinal Health will classify the Cordis business as held for sale, which Cardinal Health expects to result in a pre-tax loss of up to $120 million in the third quarter of its fiscal year 2021. Additionally, Cardinal Health was authorized to incur costs associated with the planned divestiture of up to $125 million, primarily in its fiscal years 2021 and 2022.
Advisors
J.P. Morgan Securities LLC is serving as exclusive financial advisor to Cardinal Health and Skadden, Arps, Slate, Meagher & Flom LLP served as the company’s legal advisor. UBS Investment Bank served as the sole
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financial advisor to Hellman & Friedman, with Kirkland & Ellis LLP providing the firm’s legal counsel and H&F’s committed financing for the transaction provided by Deutsche Bank Securities Inc. and UBS Securities LLC.
About Cardinal Health Cardinal Health is a distributor of pharmaceuticals, a global manufacturer and distributor of medical and laboratory products, and a provider of performance and data solutions for health care facilities. With 50 years in business, operations in more than 40 countries and approximately 48,000 employees globally, Cardinal Health is essential to care. Information about Cardinal Health is available at cardinalhealth.com.
About Hellman & Friedman
Hellman & Friedman is a preeminent global private equity firm with a distinctive approach focused on investments in high-quality growth businesses. H&F seeks to partner with world-class management teams where its deep sector expertise, long-term orientation, and collaborative partnership approach enable companies to flourish. Since its founding in 1984, H&F has raised over $50 billion of committed capital, invested in over 90 companies, and is currently investing its ninth fund, with $16.5 billion of committed capital. Learn more about H&F’s defining investment philosophy and approach to sustainable outcomes at www.hf.com.
About Ajax Health
Ajax Health seeks to identify, support and scale disruptive technologies in the healthcare space. Taking an active operating role, the Ajax team has a proven track record of helping companies of all sizes, stages and structures achieve their value-creation goals. Ajax Health is headquartered in Menlo Park, Calif. and backed by an investor group led by HealthQuest Capital along with Polaris Partners and Aisling Capital. Learn more about Ajax at www.ajaxhealth.com.
About Zeus Health
Zeus Health is a platform formed by leading global investment firm KKR focused on investing in and operating a portfolio of emerging medical technology companies. Zeus Health is a continuation of the long-standing strategic partnership between KKR and Duke Rohlen. Zeus Health is headquartered in Menlo Park, Calif.
Contacts
Media: Sarah Shew, sarah.shew@cardinalhealth.com and 614.553.3401;
Investors: Kevin Moran, kevin.moran@cardinalhealth.com and 614.757.7942.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing Cardinal Health's plans to divest the Cordis business and the financial impact to Cardinal Health resulting therefrom, as well as other statements about future expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results, trends or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include: the ability to successfully complete the divestiture of the Cordis business on a timely basis, including receipt of required regulatory approvals and satisfaction of other conditions; the risk that the costs associated with exit or disposal activities or stranded costs could ultimately be greater than we currently expect; the risk that the write-down or loss on sale of the transferred assets could ultimately be greater than we currently expect; and the possibility that the divestiture could result in an impairment of our remaining Medical unit goodwill. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This release reflects management's views as of March 12, 2021. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
Exhibit 99.2
Cardinal Health signs definitive agreement to sell its Cordis business to Hellman & Friedman
•Cordis business to be sold to Hellman & Friedman (H&F) for approximately $1 billion, which includes buyer’s assumption of certain liabilities and seller’s retention of certain working capital accounts
•Expected to close in the first half of Cardinal Health’s fiscal year 2022, subject to required regulatory approvals and customary closing conditions
Strategic Rationale
•Result of our continued portfolio evaluation and focus on investing our resources in our strategic growth areas where we are an advantaged owner
•Remain committed to our Medical distribution and global Medical products businesses, with a product portfolio generally more oriented around the operating and recovery rooms, which includes well-known brands such as Kendall™ compression, Kangaroo enteral feeding, and Curity traditional wound care gauze dressings, among others
•Focused on our strategic priorities: optimizing our core businesses, investing for growth, and deploying capital in a balanced and disciplined manner
•Enables optimization of international operations
•Anticipate using the proceeds for general corporate purposes, in alignment with our stated capital allocation priorities
Transaction
•Expected to close in the first half of Cardinal Health’s fiscal year 2022, subject to required regulatory approvals and customary closing conditions
•Upon closing, most assets and liabilities associated with the Cordis business will transfer to H&F
•Manufacturing sites in Miami Lakes, Fla.; Santa Clara, Calif.; and Juarez, Mexico will transition to H&F
•Shared facilities in Olive Branch, MS, and El Paso, TX, will remain with Cardinal Health upon closing
•Cardinal Health will retain authority for lawsuits related to inferior vena cava filters in the U.S. and Canada, as well as the liability associated with these matters1
•After closing, Cardinal Health will support the continuity of business activities through a transition services agreement
Estimated Financial Impact
•Cordis business to be sold for approximately $1 billion, which includes buyer’s assumption of certain liabilities and seller’s retention of certain working capital accounts
•After completion of the transition services agreement, the divestiture of Cordis will decrease Medical segment profit by approximately $60 million to $70 million on an annual run-rate basis
•Additional expected GAAP-only items:
•Pre-tax loss of up to $120 million in the third quarter of fiscal 2021
•Costs associated with the planned divestiture of up to $125 million expected to be incurred primarily in fiscal years 2021 and 2022
About Cordis
•Cordis, an approximately $750 million revenue business, is a worldwide leader in the development and manufacturing of interventional vascular technology with a more than 60-year history of pioneering products to treat millions of patients. With a reputation for clinical acumen, training and services, Cordis established a legacy of innovation in high-quality and less-invasive cardiovascular products and built a strong global footprint with operations in countries around the world
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing Cardinal Health's plans to divest the Cordis business and the financial impact to Cardinal Health resulting therefrom, as well as other statements about future expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results, trends or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include: the ability to successfully complete the divestiture of the Cordis business on a timely basis, including receipt of required regulatory approvals and satisfaction of other conditions; the risk that the costs associated with exit or disposal activities or stranded costs could ultimately be greater than we currently expect; the risk that the write-down or loss on sale of the transferred assets
1The transaction does not impact Cardinal Health’s ability to move this litigation forward or meet its litigation obligations
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could ultimately be greater than we currently expect; and the possibility that the divestiture could result in an impairment of our remaining Medical unit goodwill. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This release reflects management's views as of March 12, 2021. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.