Cardinal Health Ends its Relationship With CareFusion

In a move that nearly coincided with its first anniversary, Cardinal Health Inc. sold its remaining stake in CareFusion Corp., the clinical and medical products firm spun off last year. Cardinal sold the remaining 30.5 million shares it held in CareFusion stock in a block trade to global financial services firm Morgan Stanley. The shares—which represent about 13.7 percent of outstanding CareFusion stock—sold for $706 million, according to a brief filing with the U.S. Securities and Exchange Commission (SEC). Based on the figures in its SEC filing, Cardinal Health gave Morgan Stanley a discount for taking the shares off its hands.

“It’s not uncommon to see a discount on a large block trade like this,” Cardinal Health spokesman Troy Kilpatrick, told MedCity News.

The end of Cardinal Health’s relationship with CareFusion has been in the making since the spinoff in August 2009. In its 2010 fiscal year (ended June 30), Cardinal Health sold 10.9 million shares of CareFusion stock for $270.7 million, according to its SEC filing.

CareFusion, however, has had some growing pains since gradually being granted its independence. Last month, the San Diego, Calif.-based firm announced that it would lay off 700 workers, or nearly 5 percent of its workforce, as it attempts to generate $100 million in annual savings. The company experienced a 66 percent drop in profits during the fourth quarter of fiscal 2010, posting $52 million in net income or 23 cents per diluted share on sales of $1.04 billion during the three months ended June 30. Those figures compare with a net income of $96 million, or 44 cents per diluted share during the fourth quarter of fiscal 2009.

The decline is prompting the company to look for ways to save up to $95 million during fiscal 2011 and an additional $120 million in fiscal 2012. One of those ways is by eliminating layers of management and reducing its supporting infrastructure, according to the company. The moves will cost up to $50 million in fiscal 2011.

“During fiscal 2010, we evaluated our cost structure and the strategic fit of certain businesses and are now taking the necessary steps to ‘right-size’ our company,” CareFusion Chairman and CEO David Schlotterbeck said in a prepared statement. “Our goal is to improve our competitive position, accelerate our previously announced efforts to improve our operating margins and enhance our focus on the core opportunities we have for growth.”

Schlotterbeck added: “We are expecting revenue growth of mid-single-digits on a reported basis over fiscal 2010 results and adjusted diluted earnings per share of $1.58 to $1.68, an 11 percent to 18 percent increase.”