BD
(NYSE: BDX)
today announced it signed a definitive agreement to acquire Edwards Lifesciences‘
(NYSE: EW)
Critical Care business.
The Franklin Lakes, N.J.–based company will pay $4.2 billion in cash for the patient monitoring business segment. Critical Care will operate in Irvine, California as a separate business unit within the BD Medical segment, and will be led by Katie Szyman, corporate VP of Critical Care at Edwards.
Analysts were positive about the deal. Truist analysts noted that the sale provides a cleaner transaction than Edwards’ previously announced plans to spin off Critical Care.
BD plans to fund the all-cash transaction with approximately $1 billion of cash and $3.2 billion of new debt. Subject to customary regulatory reviews and closing conditions, the transaction is expected to close before the end of the calendar year.
Company executives expect the transaction to be immediately accretive to all financial measures and to yield strong returns. Critical Care generated over $900 million in revenue in 2023 and has approximately 4,500 employees.
The Critical Care business will expand BD’s smart connected care solutions. The Edwards business segment invented the hemodynamic monitoring category, and Edwards’ monitoring solutions are currently used in more than 10,000 hospitals globally for cardiovascular conditions.
The technology included in the deal includes the gold-standard Swan Ganz pulmonary artery catheter, minimally invasive sensors, noninvasive cuffs, tissue oximetry sensors and monitors. The smart technologies in the devices are driven by data analytics with machine learning and AI-based predictive and prescriptive algorithms.
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“Critical Care expands BD’s portfolio of smart connected care solutions with its growing set of leading monitoring technologies, advanced AI-enabled clinical decision tools and robust innovation pipeline that complement BD’s existing technologies serving operating rooms and intensive care units,” BD CEO Tom Polen said in a news release. “We believe the combination unlocks multiple new avenues for growth and value creation through BD’s broad global footprint, increased penetration across new and existing hospital customers, new innovation opportunities across data sets and platforms, and application of the BD Excellence operating system.”
Edwards cancels a spinoff
Edwards announced in December last year that it planned to spin off the Critical Care business by the end of this year. However, with this agreement, the company is no longer pursuing the spinoff.
Instead, Edwards will use the after-tax cash proceeds to fund strategic growth investments. The company expects the sale to enhance its balance sheet flexibility for disciplined investments in technologies for aortic, mitral, tricuspid and pulmonic patients. It also wants to explore new therapeutic areas for interventional heart failure.
“Edwards’ underlying rationale for separating Critical Care remains the same: we are laser-focused on pursuing a strategy centered on structural heart disease,” Edwards CEO Bernard Zovighian said in a news release. “Our goal is to serve large unmet patient needs with our differentiated innovations while extending our global leadership, delivering sustainable growth and increasing shareholder value. Critical Care has made significant contributions to our company and has a long history of pioneering innovation. We believe this transaction will strengthen Edwards, Critical Care and BD, paving the way for both companies to deliver even greater value to patients.”
Edwards’ TAVR devices continue to drive business for the company. It has led the transcatheter aortic valve replacement (TAVR) market for over a decade. The company was one of the first companies to market a TAVR device and is developing a transcatheter mitral valve replacement option. It also developed the first device approved by the FDA to treat tricuspid regurgitation.
What analysts are saying
Analysts view this transaction favorably for both companies. William Blair analysts predict the deal will have a minimal impact on Edwards’ 2024 earnings per share, and they expect the company to have double-digit revenue and profit growth from 2025 onward.
For BD, William Blair analysts Margaret Kaczor Andrew and Andrew Brackmann highlighted the strategic benefits of the acquisition, noting its alignment with BD’s long-term growth plans. They believe the acquisition strengthens BD’s position in the connected care market and could enhance clinical decision-making capabilities to drive higher BDX stock.
Additionally, analysts see Edwards’ divestiture as a strategic move, allowing the company to concentrate on its core structural heart business. Andrew and Brackmann said the focus is anticipated to drive growth and improve margins.
Shares in EW were up less than one percent to $87.65 apiece, and BDX was up 3.12% to $239.20 apiece in mid-morning trading.
