KCI the Target of an LBO?

Kinetic Concepts Inc. (KCI) could be on the block for a whopping $5 billion. The compan makes products for wound care, bariatric and critical care markets.

According to reports in the Wall Street Journal, the San Antonio, Texas-based company has held talks with several buyout firms, including the Blackstone Group. If a deal is inked, a buyout of Kinetic Concepts would be the largest private equity transaction of 2011, according to data from Thomson Reuters.

In recent years, rivate equity firms have been attracted to wound-care businesses, which have relatively stable cash flows against which they can borrow lots of debt. Bristol-Myers Squbb sold its Convatec business to Avista Capital Partners and Nordic Capital for $4.1 billion—the largest buyout of 2008. Also that year, One Equity Partners bought Johnson & Johnson’s wound-care unit for an undisclosed price. One Equity renamed the company Systagenix.

In 2008 Kinetic Concepts paid $1.7 billion in cash for LifeCell, which develops surgery products that use human skin tissue.

But the company has been in a fight with Wake Forest University in Winston-Salem, N.C, regarding patents related to its V.A.C. therapy products, which use vacuums to help heal wounds.

Blackstone is no stranger to the medical device market. In 2006, it was part of a consortium that paid $11 billion for orthopedic manufacturer Biomet Inc. In 2007 it was behind the buyout of DJO Inc. for nearly $2 billion.

Last year, KCI reported $256.1 million in profit on $2 billion in revenue. The firm was founded in 1976.