Cardinal Health announced plans Tuesday to cut as many as 1,300 jobs as it prepares to spin off its Clinical and Medical Products divisions into the CareFusion Corporation.
Company officials said the global workforce would be reduced by approximately 800 over six months, while another 500 positions would be eliminated through normal attrition or not filling open roles. They said the cuts are not related to the spinoff, but can be blamed on the sour global economy.
“While many companies have taken similar actions to respond to the current economic realities, these are very difficult decisions because of their effect on our employees and their families,” said R. Kerry Clark, Cardinal Health’s chairman and CEO, in a press release. “However, these measures are necessary to help offset current economic conditions and will ultimately strengthen our businesses for the longer-term.”
The company, based in Dublin, Ohio and with a global workforce of roughly 40,000 people, expects to take a restructuring charge of about $33 million for the remainder of fiscal 2009 and another $24 million in fiscal 2010 as a result of the workforce reductions. Company officials say the reductions will ultimately save the company between $110 million and $130 million within two years.
Company officials also announced cost control measures and additional reductions in discretionary spending across all of Cardinal Health’s businesses. They attributed the cuts to a delay in hospital spending and the overall decline of the global economy.
Also Tuesday, company officials announced the filing of a Form 10 registration statement with the Securities and Exchange Commission confirming details of the upcoming spinoff of CareFusion, which is currently a wholly owned subsidiary of Cardinal Health. The filing outlines Cardinal Health’s plan to spin off at least 80 percent of the outstanding common stock of CareFusion through a pro rata distribution to Cardinal Health shareholders. The remaining 20 percent would be held by Cardinal Health, which would divest its shares within five years of the spinoff.
“The Form 10 marks a major milestone on the road to launch CareFusion as a public company focused on the safety and quality of care,” said David Schlotterbeck, Cardinal Health’s vice chairman, who is scheduled to become CareFusion’s CEO. “While we continue to target the summer of 2009 to complete the spinoff, some of the conditions to completing the spin are not within our direct control, which may push the spinoff to later in the year. As we work to complete the spinoff, we remain very focused on serving CareFusion’s global customers and managing our near- and long-term business objectives.”
Company officials expect CareFusion to employ 16,000 people and have annual revenues of $4 billion, with a focus on helping the healthcare industry improve the safety and quality of healthcare. The company offers several products focused on eliminating medical errors and reducing hospital-acquired infections, including Alaris IV pumps, Pyxis automated dispensing and patient identification systems, MedMined electronic infection surveillance software, AVRA and Pulmonetic Systems ventilation and respiratory products, Jaeger and SensorMedics pulmonary products, ChloraPrep infection prevention products and V. Mueller surgical instruments.
