BD to buy CareFusion for $12.2B to become more hospital-focused

Inversion mania seems to be dying down, but med tech merger mania continues. In the latest development, Becton Dickinson ($BD) announced over the weekend that it will acquire CareFusion ($CFN) for $12.2 billion in a bid to save costs and broaden the company's offerings to hospitals.

BD CEO Vincent Forlenza said in a statement that the acquisition will help the company "address unmet needs in the growing $20 billion global medication management industry." It will accelerate the 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."

With $8.3 billion in annual sales, BD sells diagnostics, diabetes care products and drug delivery devices like catheters. The acquisition of CareFusion will add about $3.8 billion in annual revenues through sales of infusion pumps, ventilation and respiratory products, surgical instruments and software-based solutions. The deal is expected to close in first half of 2015.

"Hospital needs are certainly driving this," because their "pressures are intensifying as health-care spending comes under more pressure not just in the U.S. but around the globe," CareFusion CEO Kieran Gallahue told the Wall Street Journal. He also said in the article that BD will help globalize his company because BD earns 60% of its sales abroad, while 75% of CareFusion's sales are in the U.S.

Meanwhile, Forlenza told the WSJ that CareFusion's software to track hospitals' use of drugs and machines to store and fill their medications made it an attractive target. Those CareFusion offerings and its others "may help hospitals cut costs and reduce hospital infections, both of which are goals from Obamacare," Bloomberg Intelligence analyst Jason McGorman told Bloomberg. It's also worth noting that efficient medication dispensing and other techniques to help hospitals cut costs are not just products, but services, or "solutions" in the parlance of device company execs.

The release says that BD has identified $250 million in synergies that it will achieve by 2018. The company will suspend its annual share repurchases worth $400 million until its debt level comes down.

According to Bloomberg there are $470 billion in pending or closed life science deals so far this year. Many of those come from the med tech industry, led by Medtronic's ($MDT) pending $43 billion purchase of Covidien ($COV).

- read the release
- read the WSJ's take
- read Bloomberg's take

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