J&J Continues ‘Strategic Pruning’ With This Divestiture

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Johnson & Johnson (NYSE:JNJ), like many pharmaceutical manufacturers, must respond to increasing price controls abroad, patent expirations, and pressure on payments from insurance companies and the government. And like many of its peers, the company is choosing to divest one of its divisions: the Ortho Clinical Diagnostics unit that makes blood-screening equipment and laboratory blood tests.

On Thursday, private equity firm Carlyle Group (NASDAQ:CG) announced it purchased Johnson & Johnson’s Ortho-Clinical Diagnostics unit for $4.15 billion, allowing the pharmaceutical company to divest the slow-growing business in order to focus on more lucrative products. Johnson & Johnson is my no means the only company spinning off business units, either. Pfizer (NYSE:PFE) divested its animal health products business, and Abbott Laboratories (NYSE:ABT) split off its branded drugs unit early in 2013.

It is Carlyle’s largest health care investment since acquiring the nursing, hospice, and home health services provider Manor Care in 2007. “Through accelerated investment in research and product development and continued expansion into both emerging and established markets, we expect to tap into rising demand for sophisticated medical diagnostic products and services worldwide,” said Carlyle Managing Director Stephen H. Wise in the press release announcing the purchase.

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