Details of the deal
On April 23, 2017, Becton, Dickinson and Company (or BD) (BDX) announced that it will acquire C.R. Bard (or Bard) (BCR) for $317 per Bard share, for a $24.0 billion cash and stock deal. BD will also assume $1.6 billion of debt and $1.1 billion of cash on Bard’s balance sheet.
C.R. Bard shareholders will receive $222.93 in cash and $94.07 per BD share. That implies an ownership of around 15.0% of the combined company.
BD plans to finance the acquisition through a combination of cash, new debt, new equity, and equity-linked securities. The acquisition is expected to close in the fall of 2017. According to BD, Bard will operate as part of BD Interventional, a new third division in the combined company. BD has also appointed Tom Polen, former president of BD Medical, as president of BD. Polen will also oversee the operations of BD Interventional.
The deal’s expected synergies
Together, BD and Bard generate annual revenues of ~$16.0 billion and employ around 65,000 employees. The combined company will have a presence in almost all countries around the globe. So the deal is estimated to increase BD’s addressable market opportunity.
BD expects to realize annual cost savings of around $300.0 million by fiscal 2020 and is expected to be immediately earnings-accretive. Revenue synergies are expected to be realized from the beginning of fiscal 2019. Gross margins are expected to improve by 300 basis points in fiscal 2018.
After the announcement of this ambitious acquisition, C.R. Bard stock rose 20.0%, and BD stock fell around 4.0%. The Health Care SPDR ETF (XLV) rose about 1.0% during the day, and the iShares Dow Jones U.S. Medical Devices ETF (IHI), a medical device–focused fund, rose ~1.5%.
The medical device industry in the United States is seeing a number of large acquisitions recently. They include Abbott Laboratories’ (ABT) acquisition of St. Jude Medical and Medtronic’s (MDT) acquisition of Covidien.
Let’s look next at BD’s deal rationale.