The proposed transaction includes the Contour portfolio of blood glucose monitoring meters and strips, as well as other products such as Breeze 2, Elite and Microlet lancing devices.
Tokyo-based Panasonic Healthcare is 80% owned by the US private equity group KKR, while Panasonic holds the remaining 20% stake.
Bayer board of management member Werner Baumann said: "We are confident that the sale of our Diabetes Care business to our long-standing partner Panasonic Healthcare, with the strong backing of KKR, will support the long-term sustainability of this portfolio."
KKR Europe, Africa and Middle East head Johannes Huth and KKR Japan CEO Hiro Hirano said in a joint statement: "Together, we will leverage our experience and network to create a global diabetes care solutions powerhouse in an effort to make this a transformational transaction for the diabetes care industry."
Bayer's Diabetes Care business manufactures blood glucose monitoring systems, lancing devices and diabetes management software, and reported sales of €909m in 2014, with Contour as the principal product portfolio.
Featuring Contour Next, Contour Plus, Contour and Contour TS, the portfolio is designed to address requirements of all patients irrespective of type of diabetes, stage of disease or testing frequency.
Other products include Breeze 2, Brio, Entrust, as well as Elite and Microlet lancing devices.
Subject to customary conditions, including relevant anti-trust clearance, the transaction is expected to close in the first quarter of 2016.
Image: Bayer's blood glucose monitoring systems are designed to meet the needs of diabetic patients regardless of type and stage of the disease. Photo: courtesy of Bayer AG.