A maker of small medical devices is making a very big purchase, one that will also mean big changes for the company's capabilities and focus.
Becton Dickinson and Co. has struck a $12.2 billion deal to buy CareFusion Corp., a San Diego-based medical technology firm specializing in reducing medical errors and preventing hospital-acquired infections.
The deal has been approved by both company's boards of directors but has yet to be approved by either CareFusion's shareholders or U.S. regulators. It is expected to be complete by the second quarter of 2015.
CareFusion will operate as part of BD's Medical business unit, maintaining its San Diego presence. BD's corporate headquarters is in Franklin Lakes, New Jersey.
“[The deal] accelerates BD's transition from a product-focused company to a customer-centric provider of innovative healthcare solutions with leading scale across the medication management value chain and expanded solutions for patient safety,” said Vincent A. Forlenza, BD's chairman, president and CEO in a news release. “We've long admired CareFusion's strong franchises and look forward to welcoming their talented team to BD.”
With the acquisition, analysts say 117-year-old BD will likely be boosted into the top five largest medical device and technology companies in the world. On the manufacturing side, BD is already a global leader in making needles, syringes, tubing and other plastic laboratory and hospital supplies; CareFusion, founded in 2009, makes pumps, cabinets and dispensing systems for infusions and IV treatments.
“This is a big move for management, and it definitely makes [BD] a big player in drug administration and management,” said Michael Waterhouse, a Chicago-based financial analyst with Morningstar. “Since CareFusion has struggled building its business outside the U.S., there is a nice opportunity here for BD to expand CareFusion's operations on a global scale.”
Earlier this year, the CareFusion and the U.S. Justice Department reached at $40.1 million settlement after the company was accused of paying kickbacks and promoting its products for uses that were not approved by the Food and Drug Administration from 2008 to 2011.
CareFusion Chairman and CEO Kieran T. Gallahue said in a news release that his company sees the acquisition as a change for global growth and an “attractive value for CareFusion shareholders.”
However, analysts are not as enthusiastic, warning the new BD could be risky as an investment as the company is taking on a large amount of debt to make the deal happen. Goldman Sachs is engineering a $9.1 billion bridge loan — representing more than 73 percent of the cash-and-stock deal.
While Medtronic Inc.'s inversion acquisition of Dublin-based Covidien Plc, announced earlier this year, involves a $16.3 billion bridge loan as part of the $42.9 billion deal, the debt only makes up 38 percent of the transition.
Device giant Zimmer's plan from earlier this year to buy cross-town rival Biomet in a $13.35 billion cash and stock deal creating the world's largest stand-alone medical device maker, includes taking on about half of the deal in debt with a $7.6 billion bridge loan, in part to clear the debt from Biomet's 2007 buyout.