NEW YORK – For more than a century, medical devices company Becton, Dickinson & Co. got by without any major acquisitions. That’s changed dramatically under CEO Vincent Forlenza, who is turning out to be a serial dealmaker.
The company late on Sunday said it had forged its largest deal ever by agreeing to buy C.R. Bard Inc., which has operations in Warwick under the name Bard Davol, for $24 billion to combine two of the world’s biggest health-care suppliers. That marks the 12th acquisition since Forlenza took the helm of the Franklin Lakes, N.J.-based company more than five years ago, and eclipses the $12 billion acquisition of CareFusion Corp. he oversaw in March 2015.
Forlenza’s shopping spree comes out of necessity. Medical suppliers to hospitals and doctors have been under rising pressure to bring down prices, triggering consolidation among makers of medical devices. Investors seem to approve of the strategy: Becton’s stock has more than doubled since Forlenza became CEO in October 2011 and surpassed the 132 percent returns generated by the S&P 500 Health-care Equipment Index.
“As a provider to hospitals, you need to be big and have really diversified offerings,’’ said Rudi Van den Eynde, who helps oversee about $1 billion in assets at Candriam Investors Group, including shares of Becton. “Going again after a pretty expensive and big deal, you’d have to say there’s a kind of urgency.”
Shares of Becton dropped 3.3 percent $179.11 at 9:54 a.m. in New York. The Bard agreement, at $317 a share, offers a 25 percent premium on Bard’s Friday closing price. Bard’s stock jumped 21 percent to $305, the biggest intraday gain since 2001.
Deals fest
The deal marks the fifth year of consolidation among makers of medical devices, which have announced or completed $373 billion of mergers and acquisitions since the end of 2012, according to data compiled by Bloomberg. The largest: Medtronic PLC’s $42.9 billion acquisition of Covidien PLC, announced in 2014, which allowed the buyer to move its legal headquarters to Ireland and slash its global tax rate. In January, Abbott Laboratories completed its $30 billion acquisition of St. Jude Medical Inc. to gain bargaining power with hospitals.
With larger portfolios, the medical companies can offer hospitals and purchasing groups package deals on products and services that customers are demanding as they themselves merge into larger health systems with centralized operations.
Forlenza rose within the ranks at Becton, joining the company in 1980 and guiding the strategic planning and marketing of several business units before becoming CEO in 2011. He added the position of chairman in 2012.
Cash, stock
Becton, which hadn’t disclosed a purchase of over $1 billion before 2012, agreed to pay $317 a share for Bard in cash and stock, or about 25 percent more than Bard’s April 21 closing price, the companies said in a statement on Sunday. Becton expects $300 million in cost cutting by 2020 from the purchase. Boards of both firms have unanimously agreed to the deal, according to the release.
Bard specializes in minimally invasive devices such as catheters and ports for people with irregular heartbeats, end-stage renal disease and clogged arteries, which Becton says will complement its offerings in intravenous drug delivery systems. The combined companies will also offer products capable of addressing 75 percent of the “most costly and frequent health-care associated infections.”
The Murray Hill, N.J.-based company will add to Becton’s scale in the growing categories of oncology and surgery and expand its offerings in areas such as vascular disease, urology, and hernia care, according to the statement. Their combined scale will increase international presence and opportunities; together, the companies will have about $1 billion annual revenue in China, they said in the statement. About $300 million in annual, pretax, run-rate synergies are expected by the 2020 fiscal year, they said.
