Cardinal finalizes breakup plan; Barrett, Schlotterbeck to lead firms
DUBLIN , Ohio Culminating a two-year, top-to-bottom evaluation of its core principles and business strategy, Cardinal Health yesterday revealed plans for a tax-free spin-off of its clinical and medical products businesses as a separate public company.
The spin-off will create a new, global company based in San Diego, with offerings for infusion, medication and supply dispensing, respiratory care, infection prevention, medical diagnostics and surgical procedures.
Heading the new company will be current Cardinal vice chairman and med-tech industry veteran David Schlotterbeck. Among its product offerings will be the Alaris IV infusion and Pyxis dispensing systems, AVEA and LTV series ventilators, V. Mueller surgical instruments, and products to reduce hospital-acquired infections through MedMined services and ChloraPrep preoperative skin preparation.
Under the consolidation plan, which was first announced in July, Cardinal will retain its $80-billion-plus core business: its network of pharmaceutical and medical product distribution centers and nuclear pharmacies.
“As a result of the spin-off, which is anticipated to be completed by the middle of calendar 2009, both companies are expected to benefit from enhanced management focus and sharper strategic vision, as well as better alignment of management and employee incentives with performance and growth objectives,” Cardinal noted in a statement Sept. 29. “In addition, both companies expect improved opportunities to access and allocate capital, and the ability to make investments in their respective growth areas.”
The breakup of Cardinal’s sprawling distribution and healthcare empire also precipitates a series of major management changes at the huge company. Chairman and chief executive officer R. Kerry Clark, 56, will continue to lead Cardinal Health through the spin-off and then will retire, the company announced. His successor will be George Barrett, 53, who has served as vice chairman and chief executive officer of Healthcare Supply Chain Services since joining Cardinal in January.
In addition, the company announced that founder Robert Walter will retire from its board of directors by not standing for re-election when his term expires on Nov. 5, following the company's 2008 annual meeting of shareholders. Walter, who said he is “fully supportive” of the spin-off plan, will continue to serve as an adviser.
Cardinal also revealed that Jeffrey Henderson, 43, will remain chief financial officer of Cardinal Health, a position he has held since 2005, and will report to Barrett after the spin-off. In addition, Michael Lynch and Michael Kaufmann will be named to “senior business leader positions” within the company.
Barrett, Cardinal’s new chief executive, has more than 25 years of experience in the health care industry, most recently serving as president and chief executive officer of North America for Teva Pharmaceuticals and as a member of Teva’s Office of the chief executive officer. In addition to his responsibility for North American operations, he led Teva’s global pharmaceutical strategy.
“Since 1996, Cardinal Health has built an industry-leading med-tech business that, as an independent company, would have the size and scale to stand on its own,” said Clark. “This business will be well positioned to deliver maximum value to customers and shareholders over the long term.
“We undertook a very disciplined exploratory process that involved our board, management and outside advisers. The result was a unanimous decision to move forward with the spin-off. This strategic decision will benefit Cardinal Health and the new med-tech company by allowing each business to focus on its unique growth strategies, capital needs and customer requirements.”