Medline’s $30 Billion LBO Is Latest Megadeal Marrying World’s Richest And Private Equity…

When the families behind some of the world’s biggest fortunes decide change is needed in their business empires, they’re increasingly turning to large private equity giants.

On Saturday, Illinois-based Medline Industries, a family-owned maker of medical equipment like masks, surgical gowns, drapes, sanitizing products and biohazard bags, sold itself for about $30 billion to a consortium of private equity firms including Blackstone Group, Carlyle Group and Hellman & Friedman. After a hotly fought over negotiations involving other blue chip bidders, the winners have struck the largest buyout deal since the 2008 financial crisis, and one that rekindles memories of the “club deals” of the 2000s leveraged buyout boom.

For the family behind Medline, the LBO will be an enormous windfall. Owned by the Mills family—Andy Mills is president, his cousin Charlie Mills is CEO and Andy’s brother-in-law Jim Abrams is COO—they will sell a majority of Medline to the private equity consortium and receive pre-tax proceeds of over $22 billion, according to Forbes estimates. Collectively, the Mills family retain just over 25% ownership in Medline, continue to run the company under existing management, and remain its largest singe shareholder. (Medline, through a spokesperson, declined to comment on our estimates.)

Largely unknown until a Forbes feature a year ago, Medline’s distribution of medical supplies to hospitals across the United States was a critical part of the country’s response to the Coronavirus pandemic as it supplied hundreds of nursing homes, pharmacies and 45% of the top 150 hospital systems nationwide. Our March 2020 feature detailed Medline ramping production of cleaning supplies and sanitizers even before the government invoked Defense Production Act.

Overall, business boomed for Medline in the pandemic-plagued year. Revenues hit $17.5 billion and sales rose by 25%. With vaccinations ramping up worldwide, Medline’s business outlook remains promising. It distributes over half a million different pieces of equipment and is developing novel skin graft products. With its new private equity backers, Medline and the Mills family are now looking to expand their U.S.-focused operations globally. The deal is expected to close by the end of the year.

“The company plans to use the new resources from the partnership to expand its product offerings, accelerate international expansion and continue to make new infrastructure investments to strengthen its global supply chain,” said Medline in a statement unveiling its mega deal.

Medline is taking on private equity investors at the fore of the global medical supply chain. Blackstone, for instance, owns roughly a billion square feet of logistics space worldwide and has a firsthand view of the complexities of moving supplies and equipment around the world. Carlyle Group and Hellman & Friedman are among the most active healthcare investors in the world, having just fully monetized their investment in clinical research giant PPD via its blockbuster $17.4 billion sale to Thermo Fisher. Furthermore, in December, Carlyle listed its giant investment in Rede D’or, Brazil’s biggest hospital chain, at a $22 billion valuation.

“This investment from some of the world’s most experienced and successful private investment firms will enable us to accelerate that strategy while preserving the family-led culture that is core to our success,” said Charlie Mills, Chief Executive Officer of Medline, in a press release unveiling the deal.

The Mills family is not alone in turning to big buyout firms sitting on a collective trillions of dollars in assets to impart new growth on their businesses. If anything, there is a lot in common with Medline’s LBO and industry’s signature deals over the past decade.

When personal computer billionaire Michael Dell faced a crossroads for his once dominant Dell Inc., he worked with private equity firm Silver Lake Partners on a $25 billion buyout that took the technology asset rich company private in 2013. Over the subsequent eight years, Dell and Silver Lake revived growth at the PC business, then they went on the offensive, opportunistically growing Dell’s presence in cloud computing and cybersecurity through acquisitions. Their complex deals involved Dell’s private family office and also raised capital from Singaporean sovereign wealth fund GIC. Worth about $15 billion at the outset of his buyout adventure with Silver Lake, Dell is now worth $50 billion, Forbes recently reported.

In Canada, Woodbridge, the family-owned vehicle of the the Thomson family that houses their ownership of media and financial technology empire Thomson Reuters faced an inflection. After a decade stagnation on public markets, Woodbridge turned to Blackstone in 2018 to sell control of Thomson Reuters’ valuable financial and risk business Refinitiv. The leveraged buyout, at the time, was then the high watermark of post-crisis deals at an $18 billion valuation. With proceeds, Thomson Reuters bought back billions in stock and held a 45% stake in the Blackstone-led deal, which has surged in value.

After the $18 billion deal, Blackstone spit apart and listed valuable pieces of the Thomson Reuters empire, like its Tradeweb electronic bond and derivatives trading platform. Refinitiv recently merged with the London Stock Exchange. For Woodbridge and the Thomson family, the LBO has been a massive windfall. Valued by Forbes at $25 billion at the outset of its deal with Blackstone, the David Thomson & family is now worth $45.8 billion according to our real-time net worth.

The Mills family behind Medline are hoping for a similar outcome. Their $30 billion mega-deal involves some of the world’s biggest and most well-connected investors as they globalize a family-owned business in an environment fraught with post-pandemic supply chain risks.

For more on Medline: Read our March 2020 feature by Kristen Stoller inside the company’s history and pandemic response