Well better than nothing
As Diabetic Investor reported just yesterday the deal between Bayer and Panasonic/KKR is coming to fruition and it looks like Bayer really wants out. According to several reports that sale price will come in around $830 million, a far cry from the $2 billion some thought the unit could fetch.
While we’re sure Bayer is excited to finally unload this unit, we’re also pretty sure the sale price (if accurate) isn’t being well received at Abbott (NYSE:ABT), Roche or Johnson and Johnson (NYSE:JNJ). JNJ in particular might be feeling pretty bad as not only is the sale price well below expectations the fact that two recent insulin pump IPO’s have been delayed doesn’t bode well for their insulin pump unit Animas. Yes we know that JNJ publicly states they are committed to diabetes yet we also know that if the right offer came along they sell in heartbeat.
Looking back on this saga, remember this is not the first time Bayer had the unit up for sale, Diabetic Investor can only think that Bayer overplayed their hand. At time it looked like Sanofi (NYSE:SNY) was going to buy the unit and pay $1 billion or so, believing they had a deal in place Bayer went to back to Panasonic (yes they were involved the first time around too) who smartly said they did not want to outbid Sanofi. What Bayer should have known is that Sanofi isn’t very good at making decisions and eventually backed out of the deal.
While Diabetic Investor commends Panasonic/KKR for their discipline it remains to be seen if anything at all will change. As we noted previously we view this move as more defensive than offensive. Even at the lower price the company, assuming they do want to compete, will have invest millions more just to have the chance at being competitive.
Although Bayer may have overplayed their hand Diabetic Investor also believes they should be commended too. To their credit they saw the handwriting on the wall, realized they were ill-equipped to handle where the market is going and decided better to get out before there was no value whatsoever.
The question is are the people at Abbott and Roche paying attention? This is not to say that JNJ shouldn’t but they are in much better shape than either Abbott or Roche.
Let’s see if this is the start of the dominos falling, as some suspect or whether this is just a one hit wonder.