Becton, Dickinson (BDX) A Step Closer To Bard Acquisition

Shares of Becton, Dickinson and Company (NYSE:BDX) fell 0.3% to $217.02 on Dec 26 following the Federal Trade Commission’s (FTC) nod for the much talked about C. R. Bard (NYSE:BCR) acquisition. C.R. Bard was however up 0.6% and closed at $333.41.

Becton, Dickinson and Company now awaits approval by the Ministry of Commerce of the People's Republic of China (MOFCOM) to complete the proposed acquisition. It also needs to fulfill certain customary closing conditions

Deal Details

In April 2017, Becton, Dickinson signed an agreement to acquire C.R. Bard. Per management, Becton, Dickinson is on track to become one of the biggest medical technology devices company in the world with this buyout. The cash-plus-stock acquisition is valued at $24 billion. After the completion of the deal around, Becton, Dickinson and Company will create a third business segment – BD Interventional. Notably, C.R. Bard will be integrated into this vertical.

Further, Becton, Dickinson and Company announced that it will divest its soft tissue core needle biopsy products along with C. R. Bard's Aspira product line of tunneled home drainage catheters and accessories for $100 million to Merit Medical Systems, Inc. (NASDAQ:MMSI) in order to facilitate approval for the acquisition.

C. R. Bard had announced back in August that the majority of its shareholders approved its merger with Becton, Dickinson. Holders of approximately 99% of C.R. Bard’s shares that participated in the vote favored the merger.

Benefits for Becton, Dickinson and Company

Coming to the strategic advantages post the deal closure, Becton, Dickinson and Company will generate high-single digit growth in adjusted earnings per share by fiscal 2019. The transaction will also lead to $300 million in pre-tax annual savings in fiscal 2020.

Becton, Dickinson and Company will be able to expand to new areas where C.R. Bard currently operates – fast-growing vascular access segments – PICCs (peripherally inserted central catheters), midlines and drug delivery ports. Moreover, the acquisition is expected to strengthen the combined entity’s footprint in the home healthcare market in the United States. A research report by ‘Markets and Markets’ reveals that the home healthcare market is expected to reach a total of $349.8 billion by 2020 at a CAGR of 9%.

Conclusion

We view the acquisition as a strategic fit as it will generate benefits from complementary businesses and geographical expansion. However, the combined entity is likely to face some challenges with regard to the integration of the new businesses and the costs associated with them. Apart from this, increased competition, delay in order renewal process and constricted federal spending are other concerns.

Share Price Movement

Becton, Dickinson and Company has outperformed the broader industry year to date. The stock has gained 31.1% compared with the broader industry’s increase of 21.5%.

Zacks Rank & Key Picks

Becton, Dickinson and Company carries a Zacks Rank #3 (Hold).

A better-ranked medical stock is Bruker Corporation (NASDAQ:BRKR) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bruker has a long-term expected earnings growth rate of 9.9%. The stock has rallied roughly 60.8% in a year.

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