Morgan Stanley Analyst Sees Higher Net For Cardinal Health In Johnson & Johnson Deal

Cardinal Health Inc CAH might boost its 2015 earnings by 6 percent if rumored talks to buy Johnson & Johnson's JNJ cardiovascular device business pan out, an analyst said Monday.

Morgan Stanley's Richard Goldwasser said a deal would be consistent with Cardinal's strategy and could add $0.26 a share to its earnings over the first 12 months.

Analysts on average expect 2015 earnings for Cardinal of $4.35 a share, on revenue of $98.96 billion.

Godwasser estimated Cordis' sales at about $925 million, and figures its sales are declining about 2 percent annually.

Citing unnamed sources, Bloomberg reported Saturday that Cardinal is "the leading suitor" to acquire Johnson & Johnson's Cordis business.

Goldwasser noted that Cardinal's Chief Executive for its medical device business, Donald M. Casey, Jr., served as Johnson & Johnson's chairman, of its comprehensive care group from 2010 to 2012.

Casey probably "has a deep understanding of the Cordis franchise and positioning and how it would fit with Cardinal's strategy," Goldwasser said.

Cardinal would likely pay $2 billion to acquire Cordis, financed half with cash and half with debt, according to Goldwasser, who said a deal could cut Cordis's costs by $25 million annually.

Cardinal's acquisition of Cordis could widen its medical segment margin by about 100 basis points, Goldwasser added.