Becton, Dickinson and Co. (BD) is set to acquire C.R. Bard Inc. for $24 billion in cash-and-stock. The acquisition values Murray Hill, N.J.-based Bard at $317 per share, a 25 percent premium over Friday's close of trading. Bard shareholders could receive $222.93 in cash and 0.5077 shares of Franklin, Lakes N.J.-based BD for each of their shares. The acquisition is expected to close in the fall of this year.

Upon news of the pending acquisition, Bard (NYSE:BCR) shares rose more than 19 percent Monday closing at $302.41. BD (NYSE:BDX) shares declined 4.4 percent closing at $177.07.

BD said it would contribute about $1.7 billion of available cash to fund the transaction, along with $10 billion of new debt and about $4.5 billion of equity and equity linked securities issued to the market.

A third segment will be created within the combined company – BD Interventional – where the Bard businesses will report both operationally and financially.

Bard brought in about $938.8 million in 1Q17 sales, with its vascular products bringing in $256 million. Bard's urology portfolio brought in $237.7 million, with oncology raking in $255 million.

"As we went through the portfolio and looked at Bard, all of a sudden the strategic rationale was more compelling than it was before," said Vince Forlenza, BD's chairman and CEO, during an investor's call Monday. "This is a great fit. We became more and more impressed with where Bard was going."

Alex Morozov, an analyst with Morning Star, said BD is certainly keen on "abandoning a predictable company moniker," and noted that this was firm's second major acquisition since it picked up San Diego-based Carefusion Corp. in 2014 for $12.2 billion. (See Medical Device Daily, Oct. 7, 2014.)

Morozov said the deal shows merit, but said it could take the focus away from BD's life science and diagnostics businesses.

"This deal makes it all but certain that BD's life science and diagnostic businesses will not see any major capital infusions in the near future to bolster their presence relative to peers," Morozov said. "BD seems determined to focus its capital on its medical surgical business, which will account for three fourths of its total sales post-Bard – a decision with which we tend to agree, given its advantaged competitive positioning."

The company also announced the appointment of Tom Polen as president of BD, effective immediately. He was previously executive vice president and president of the BD Medical segment.

"This move is not entirely unexpected given Polen's role with Carefusion and further cements investor's view of him as the heir apparent to the CEO at some point in the future," said Doug Schenkel, an analyst with Cowen and Co.

If Bard should back out of the deal, it would have to pay a $750 million termination fee.

Jefferies LLC analyst Brandon Couillard noted that there was "little risk" of competing bids or meaningful regulatory issues to impede the acquisition.

HAPPENINGS IN THE PIPELINE

The deal is expected to add about $4 billion to BD's Medical revenues, giving it a stronger position in vascular access solutions, combining Bard's portfolio of catheters – including peripherally inserted central catheters, diabetes, and oncology access – with the existing portfolio of needles, syringes, IVs, and infusion pump solutions in medication delivery.

Couillard said "in addition to providing scale, the deal will position BD as a market leader in emerging therapeutic categories through Bard's Lutonix drug coated balloon and peripheral stent portfolio of products."

Bard gained access to drug coated balloons when it acquired Minneapolis-based Lutonix Inc. for $225 million in 2011. (See Medical Device Daily, Dec. 21, 2011.) The device received approval in 2014. (See Medical Device Daily, Oct. 13, 2014.)

The Lutonix device is currently in a trial for a below the knee (BTK) treatment indication, said Larry Biegelsen, an analyst with Wells Fargo. The trial currently has 340 patients enrolled. The BTK study is scheduled for an interim analysis in the first half of this year, after which BD/Bard could decide to enroll additional patients in the trial to enhance the data. If the trial continues, then it is expected to complete in early 2018 with FDA approval possible later in the year.

"If its trial is positive and the indication is ultimately approved by the FDA, Lutonix would be the sole drug coated balloon on the U.S. market for this indication," Biegelsen said. "While competitors Medtronic plc and Spectranetics Corp. are planning their own BTK, neither has started an IDE study, which puts them [more than three] years behind."

Other trials in this space have not fared well, Bieglesen noted.

"Some of our consultants believe that the previous BTK studies failed for specific reasons – i.e., Biotronik AG study was too small [with 70 patients] and Medtronic's balloon did not work," he said. "These are factors that [BD and Bard] may be able to overcome with its larger trial and a proven effective balloon."

MEGA MERGER SCORECARD

There have been a significant number of large med-tech companies that have undergone consolidation in the past few years. Back in 2014, Medtronic revealed it would acquire Covidien for $43 billion. (See Medical Device Daily, June 17, 2014.)

Prior to Dublin-based Medtronic's announcement, Warsaw, Ind.-based Zimmer Holdings Inc. said it would acquire Biomet Inc. for $13.35 billion in cash and stock. (See Medical Device Daily, April 25, 2014.) The merger came about two months after Biomet had filed paperwork with the Securities and Exchange Commission to go public. (See Medical Device Daily, March 10, 2014). Biomet had planned to raise up to $100 million in its IPO.

Earlier this year, Abbott Laboratories Inc. completed its acquisition of St. Paul, Minn.-based St. Jude Medical Inc. for $25 billion. (See Medical Device Daily, Jan. 12, 2017.)

Abbott spent the better part of 2016 trying to close the St. Jude deal but ran into a few stumbling blocks along the way. Notably, the Abbott, Ill.-based company had to settle concerns from the Federal Trade Commission, who said the combined company would control a significant percentage of the vascular closure device market. The deal was green lit after the FTC accepted a proposal from the divestiture of St. Jude's vascular closure device business and Abbott's steerable sheath business to Tokyo-based Terumo Corp. (See Medical Device Daily, Dec. 30, 2016.)

"Bigger picture – the BD acquisition of Bard represents one more step in the march towards consolidation in the medical device sector," Biegelsen said. "The news will likely fuel speculation of further consolidation in the space."