Becton, Dickinson and Company BDX, commonly known as BD, is contemplating the sale of its V. Mueller surgical instruments business, according to a report by Reuters. Notably, this business was part of peer CareFusion Corp., which BD acquired in March this year.
Reportedly, the company has hired investment bank JPMorgan Chase & Co to aid the potential sale. The surgical instruments business divestment is expected to yield around $500 million.
BD has been reviewing its overall business to identify non-core assets post the Carefusion acquisition, which was completed on Mar 17, 2015. The rumored surgical instruments business divestiture parties in accordance with that plan.
BD purchased Carefusion for almost $12.4 billion in a cash-and-stock deal. The buyout is expected to be accretive to the company’s EPS in the very first year. The merger is expected to more than double BD’s addressable opportunity by building scale and depth in medication management and patient safety solutions.
However, the merger deal has significantly increased BD’s leverage. The company financed the transaction through a debt of nearly $7.7 billion, which includes $6.2 billion in bonds, $1 billion in term loan facility and $500 million in commercial paper, with an average interest rate of 2.6%.
BD is also reportedly looking to sell its respiratory business in the latter half of this year. Per a report by Bloomberg, this segment, which sells ventilators, breathing tubes and oxygen masks, is currently valued at approximately $1.5 billion to $2 billion.
We believe these potential divestures are important from BD’s perspective, as it will not only shift focus to core operations but also improve the debt-laden balance sheet of the company.
The Carefusion merger has opened up significant opportunities for BD. The combined manufacturing footprint and operations and lower overhead expenses shouldresult in significant cost savings, going forward.
Zacks Rank
BD currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks at the current moment include AMN Healthcare Services AHS, Cancer Genetics CGIX and INC Research Holdings INCR. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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