ConvaTec is weighing plans for a corporate inversion deal as interest builds from larger companies looking to cash in on the med tech M&A trend.
Big names like C.R. Bard ($BCR) and CareFusion ($CFN) are considering shelling out $10 billion for the Luxembourg-based device outfit, even as the company's private equity owners explore plans to sell the devicemaker in 2015, Reuters reports. ConvaTec would review any compelling offer that came its way before next year, but wants to boost its value before launching an auction or going public, people familiar with the matter told the news outlet.
Both CareFusion and C.R. Bard would be able to pull off an inversion deal if they use their own stock to pay for ConvaTec, as CareFusion holds a $9 billion piece of the market and C.R. Bard boasts an $11.2 billion market capitalization, Reuters reports.
A corporate inversion could bode well for ConvaTec, as the company has faced its fair share of ups and downs in recent years. Formerly Bristol-Myer Squibb's ($BMY) wound-care unit, the devicemaker was acquired by Nordic Capital and Avista Capital Partners in 2008 for $4.1 billion. ConvaTec hedged its bets on diversification, carving a niche for itself in ostomy care, wound therapeutics and infusion devices. But earlier this year, the company shuttered its Skillman, NJ, office and let go of 188 employees from its sales, marketing and human resources division.
CareFusion and C.R. Bard would also reap the benefits of an inversion deal, moving their domicile abroad and following in the footsteps of fellow med tech heavyweights Medtronic ($MDT) and Covidien ($COV). In June, Medtronic shelled out $43 billion for the Irish devicemaker, scoring a lower corporate tax rate and adding more overseas cash to its pocket.
But recent action from U.S. lawmakers could dissuade companies from engaging in corporate inversions or put a damper on deals that have already taken place. In July, Treasury Secretary Jacob Lew issued a letter to Congress urging lawmakers to limit inversions through a quick legislative overhaul, targeting pending transactions and those completed prior to May 2014. Last week, Senate Democrats laid out a plan to restrict earnings stripping to make tax inversions less appealing for large companies.
Still, Bard CFO Christopher Holland sees potential in an inversion deal, saying the company has both the funds and wherewithal to make strategic investments.
"The fact that we haven't done anything this year doesn't mean that we don't have an interest and we don't have the capacity to do additional transactions," Holland said in the company's Q2 earnings call. "They need to make sense strategically and financially. And when we do find ones that meet these filters that we have … we can certainly finance what we need to get done."
- read the Reuters story