This morning, C.R. Bard (BCR 304.22, +51.15) announced it would be acquired by Becton Dickinson (BDX 179.09, -6.20 -3.35%) for $317.00 per share. Shares trade about 20.2% higher following that announcement and the company’s Q1 earnings beat and FY17 guidance.
For those who may not be familiar, BCR is a medical equipment manufacturer which markets products in the fields of vascular, urology, oncology and surgical specialty. BCR’s subsidiaries – Bard Access Systems; Bard Medical Division; Bard Peripheral Vascular and Bard Biopsy Systems. BDX, also a medical supplies company provides solutions that help advance medical research and genomics, enhance the diagnosis of infectious disease and cancer, improve medication management, promote infection prevention, equip surgical and interventional procedures, and support the management of diabetes.
In terms of the acquisition, BD will acquire Bard for $317.00 per Bard common share in cash and stock, for a total consideration of $24 billion. Under the terms of the transaction, Bard common shareholders will be entitled to receive about $222.93 in cash and 0.5077 shares of BD stock per Bard share, or a total of value of $317.00 per Bard common share based on BD's closing price on April 21, 2017.
BD expects to contribute about $1.7 billion of available cash to fund the transaction, along with, subject to market conditions, approximately $10 billion of new debt and about $4.5 billion of equity and equity linked securities issued to the market. Bard shareholders will also receive $8 billion of BD common stock. The deal is subject to regulatory and Bard shareholder approvals and customary closing conditions, and is expected to close in the fall of 2017.
This transaction will be immediately accretive and is expected to generate high-single digit accretion to adjusted earnings per share (EPS) in fiscal year 2019. About $300 million of estimated annual, pre-tax, run-rate cost synergies are expected by fiscal year 2020. Separately, BD also expects to benefit from revenue synergies beginning in fiscal year 2019. Also, the deal is expected to improve BD's gross margins by about 300 basis points in fiscal year 2018, increase BD's earnings per share growth trajectory to the mid-teens, and generate strong cash flow.
BD expects to create a third segment following the closing of the deal, within the company – BD Interventional — where the Bard businesses will report both operationally and financially. BD separately announced the appointment of Tom Polen, currently EVP and president of the BD Medical Segment, as president of BD, effective immediately. In his new role, Mr. Polen will oversee BD's Medical and Life Sciences segments, as well as the new Interventional segment.
BCR also announced results for its Q1 (Mar) period which were ahead of market expectations. Specifically, EPS and revenues came in at $2.87 and $938.8 million, respectively. The best performing sector was Urology, growing 10% compared to a year ago to about $237.7 million. Surgical Specialties saw net sales growth of 9% versus last year to $165.1 million and Vascular net sales were up 7% to $256.6 million.
For Q2, BCR expects net sales to increase between 4-5% on an as-reported basis. Additionally, for FY17, net sales are forecasted to increase between 6- 7% compared to prior expectations of 4-5% growth. FY17 EPS is projected to be between $11.65-11.90 compared to previous expectations for EPS of $11.45-11.75.