Avantor plans to focus resources on its lab and production businesses and use the proceeds from the sale for debt paydown. Image Credit: Cagkan Sayin / Shutterstock.

Avantor has signed a definitive agreement to divest its clinical services business to a US-based private equity company, Audax Private Equity, for approximately $650m, in a bid to “strengthen its balance sheet”.

The transaction is expected to pull in approximately $475m in cash after taxes, according to Avantor. The divesture is expected to save the company $50m in capitalised leases, with the deal expected to close in Q4 this year.

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Avantor plans to use the proceeds from the deal for debt paydown to reduce interest expenses and strengthen the company’s balance sheets. The clinical services business is part of the company’s laboratory solutions segment and includes kitting, biorepository, and related equipment and ancillaries.

According to Avantor, the clinical services segment has approximately 800 employees and is expected to generate $200m in revenue this year.

“[The divesture] is an important step for Avantor as we continue to optimise our portfolio in line with our new operating model,” said Michael Stubblefield, president and CEO of Avantor.

“The divestiture enables us to enhance our focus on strategic growth opportunities in our lab and production businesses while strengthening our balance sheet. In Audax, we are pleased to have found a new owner that recognises the value proposition of this business and is ideally positioned to invest and grow the platform for the benefit of all stakeholders.”

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Avantor has seen the sales of its products decline over the last few months. In 2023, the company reported a 7.3% decrease in net sales, compared to 2022. The downward trend is ongoing, with Avantor reporting a 2.4% decrease in sales in Q2 this year, compared to the same quarter of 2023. The company also reported an adjusted net leverage ratio of 3.9× as of 30 June 2024.

Another medical device entity that sold part of its business to a private equity company this year was UK-based Johnson Matthey, which sold off its medical device components division to European private equity company Montagu in a £550m ($700m) cash transaction.