Panasonic Sells Healthcare Unit to Private Equity Firm KKR

New York, N.Y.-based Private equity firm Kohlberg Kravis Roberts (KKR) is buying the healthcare unit of Japanese electronics giant Panasonic for $1.67 billion.

After the deal, KKR will own 80 percent of Panasonic Healthcare, while Panasonic will retain 20 percent, according to a joint statement. Panasonic said it would cooperate with KKR in managing the health care business.

Panasonic Healthcare is a comprehensive healthcare company focusing on three core businesses—in-vitro diagnostics (IVD), medicom and biomedical. Panasonic Healthcare’s IVD business makes blood glucose monitoring meters and sensors for diabetics. Its medicom business makes medical receipt computers, electronic health record systems and other IT equipment for medical clinics, while its biomedical business makes biomedical laboratory equipment including CO₂ incubators and ultra-low temperature freezers.

Panasonic, which has lost more than $7 billion in each of the last two years, is in the midst of divesting units to focus on its core businesses of electronic appliances, car components and machinery.

Panasonic recently announced plans to stop the development of smartphones and reallocate its resources.

“We believe that partnering with KKR will also allow us to learn from KKR’s global operational and business management expertise as we pursue the next stage of growth for Panasonic,” the company’s chief executive, Kazuhiro Tsuga, said in a statement on Friday.

KKR’s founder, Henry Kravis, said: “Panasonic Healthcare has excellent market positions and high-level technical capabilities, and we believe it has significant growth potential. Panasonic Healthcare’s experienced management team and employees, our equity partner Panasonic, and KKR all share a common goal of working together as partners over the long term to support further growth of Panasonic Healthcare. Japan is a very important and attractive market for KKR, and our experienced team on the ground in Japan looks forward to leveraging KKR’s global expertise and experience to make this a highly successful partnership.”

According to the Wall Street Journal, The bid for Panasonic’s healthcare business had drawn interest from multiple companies such as Toshiba Corp. and a consortium including Bain Capital LLC, another U.S.-based private-equity firm. KKR won preferential negotiating rights after presenting the highest price among the bidders, the Journal reported.

The companies expect the deal to be completed by the end of March 2014.

Owner of such familiar corporate names as Del Monte Foods and Toys “R” Us, KKR is no stranger to the medical device market. A dealmaker known for some of the largest leveraged buyouts in corporate history, among KKR’s portfolio of companies are contract manufacturer Accellent Inc. and orthopedic device company Biomet.

According to reports from Reuters, KKR also is in the initial bidding for Johnson & Johnson’s Ortho Clinical Diagnostics, which focuses on laboratory blood tests and blood screening tools. Experts claim the division would be sold for about $5 billion.