Becton Dickinson to Buy CareFusion: the Next Medtech Megamerger

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Posted in Medical Device Business by Nancy Crotti on October 6, 2014

In but another sign of consolidation in the medical device industry, Becton Dickinson has announced it will acquire CareFusion for $12.2 billion in cash and stock.

 

The combined companies’ complementary products would allow for medication preparation, administration and monitoring, and would extend the companies’ markets, according to a BD statement and a report by Reuters.

 

The BD-CareFusion deal joins a handful of other multibillion-dollar medtech mergers and acquisitions dealst that have made news this year, including Medtronic’s planned $43 billion purchase of Covidien and Zimmer Holdings’ plans for the $13.35 billion acquisition of the Biomet, the other big ortho device company headquartered in Warsaw, IN.

 

Such mergers are likely spurred by the Affordable Care Act, President Barack Obama’s program of cost-cutting healthcare reforms. Medical device companies, which mostly supply hospitals, are looking for ways to drive down costs and stay competitive.

 

Franklin Lakes, NJ–based BD is the 12th largest medical device company globally by total annual revenue, while San Diego–based CareFusion is 25th, according MD+DI’s “Top 40 Medical Device Companies” list. The new company would be in the top 10.

 

Medtech giant BD makes medical supplies, devices, laboratory equipment and diagnostic products. Its product lineup includes disposable needles, syringes and intravenous catheters. CareFusion’s flagship product lines include patient identification systems, the Pyxis automated dispensing device, the Alaris IV device, ventilators, skin prep products, infection surveillance systems and surgical instruments.

 

BD chairman, president and CEO Vincent A. Forlenza, said in the statement that the acquisition would also allow BD to hasten its transition from a product-focused company to a customer-centric one that will expand its presence in medication management and patient safety. The company said the transaction is expected to provide double-digit earnings growth, on an adjusted basis, in the first full year, and will improve to net earnings in fiscal 2018.

 

Kieran T. Gallahue, CareFusion’s chairman and CEO said the deal would offer his company growth in worldwide market share and opportunities for employees.

 

CareFusion shareholders will receive $49.00 in cash and 0.0777 of a share of BD for each share of CareFusion, or a total of $58 per CareFusion share based on BD’s closing price as of October 3, the BD statement said. It added that shareholders in both corporations support the deal, which is subject to regulatory and CareFusion shareholder approvals. If the deal closes as expected in the first half of 2015, BD shareholders will own approximately 92% of the combined company and CareFusion shareholders will own approximately 8%.

 

Not all of the news about CareFusion has been cheerful of late.

 

In June, Qmed reported that CareFusion would close its Totowa, NJ, manufacturing plant—letting go of 390 employees as it consolidates the factory’s operations into an existing facility in Mexico. The company took over the Garden State factory only about half a year ago, after closing on its $550 million purchase of Vital Signs from GE Healthcare.

 

CareFusion has also seen 10 serious recalls since the start of 2012. And early this year, it agreed to pay the federal government $40.1 million to settle allegations that it violated the False Claims Act by paying kickbacks and promoting its products for uses that were not FDA-approved.

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