Shares of CareFusion Corporation (NYSE:CFN) skyrocketed a whopping 25.02% in pre-market trading Monday. Becton, Dickinson and Co. (NYSE:BDX) announced Sunday that it had agreed to acquire CareFusion for $12.2 billion in a cash and stock deal. Becton shares also went up 9.20% to $126.50. The merger, approved by boards of both companies, aims to provide a complete range of medical products to hospitals across the globe. Hospitals are under intense pressure to improve quality and cut costs.
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CareFusion shareholders to get 26% premium
The Franklin Lakes, New Jersey-based Becton will pay CareFusion shareholders $49 in cash and 0.0777 shares of Becton for each CareFusion share they own. Based on Becton’s October 3 closing price, the deal values CareFusion at $58 per share, a 26% premium to its closing price on Friday. Becton and CareFusion expect to close the merger in the first half of 2015.
The merger clearly reflects how medical equipment makers are adapting to changes in the way hospitals do business. The two companies make products such as tubes, pumps and catheters that are used to deliver medicines to patients. The combined entity will be able to offer a full range of medical products. It will also offer tools hospitals need to deal with health insurers. Notably, insurers have been pushing the medical facilities to offer more cost-effective care, says The Wall Street Journal.
Becton, Dickinson CEO Vincent Forlenza said the move is certainly driven by hospital needs. He said Becton and CareFusion are “perfectly complementary.” CareFusion makes equipment that pump medicines into catheters. And Becton manufactures best-selling catheters that are used to put drugs into patients. Moreover, the combined entity will be able to provide these products globally. That’s because about 75% of CareFusion’s revenues comes from the U.S. while Becton generates about 60% of its sales outside the United States.
Becton gets $9.1B bridge loan from Goldman Sachs
Mr. Forlenza said what really attracted Becton was CareFusion’s machines to store the fill orders and medicines, and its software that allows hospitals to track their use of medicines. These tools will become increasingly valuable as medical facilities try to eliminate errors and reduce waste. Becton said the deal will generate $250 million in synergies.
Becton said it would maintain an active presence in San Diego, where CareFusion is based. The Franklin Lakes-based company has received $9.1 billion in bridge loan from Goldman Sachs to finance the deal.