Hologic Inc. is selling its share in its blood screening business to Grifols SA for gross proceeds of $1.85 billion in cash.

Grifols will receive a fully paid-up license to certain of Hologic's intellectual property for use in the blood screening field. About 175 people, mainly in operations and R&D, will transfer to Grifols, along with Hologic's blood screening manufacturing facility in Rancho Bernardo, Calif.

The company will retain the engineering expertise that led to the development of the TIGRIS and Panther systems, but will partner with Grifols to ensure that blood screening customers continue to benefit from the technology over time.

Hologic's share of the blood screening business was projected to contribute about $240 million of revenue, with GAAP EPS of 19 cents and non-GAAP EPS of 34 cents for fiscal 2017. The company expects to update its financial guidance for fiscal 2017 after the transaction closes.

Grifols expects the deal will positively impact group margins and bolster generation of operating cash flows. The revenues of the diagnostic division will not change from the deal due to the existing joint business between Grifols and Hologic in place since 2014. Under the existing arrangement, Grifols owns customer facing activities and records all revenues. The diagnostic division's sales will continue to represent around 16% of Grifols' total revenue.

Grifols will finance the deal with a $1.70 billion term loan and existing cash on the balance sheet.

The transaction was approved by the boards of both companies. It is expected to close in the first quarter of 2017, subject to customary conditions such as the expiration or termination of any applicable waiting periods under antitrust laws.

Morgan Stanley & Co. LLC is serving as the financial adviser, while Gibson Dunn & Crutcher LLP is serving as the legal adviser for Hologic. Grifols retained Osborne Clarke SLP and Proskauer Rose LLP as legal advisers and Nomura as a financial adviser for the deal.