Changing hospital dynamic leads Becton Dickinson to buy CareFusion

Franklin Lakes, N.J., med tech Becton Dickinson & Co., ( (BDX) ), which now calls itself BD, is buying medical supplier CareFusion Corp. ( (CFN) ) in a $12.2 billion cash and stock deal with the goal of becoming a leader in global medication management and patient safety solutions.

BD has signed a definitive agreement to buy CareFusion for $58 per share, a 26% premium to the company's Oct. 3 closing share price. Shareholders would receive $49 in cash and 0.0777 in BD shares for each of San Diego-based CareFusion's shares, BD announced Sunday evening.

The acquisition is a strategic one, allowing BD to meld the two companies' complementary product portfolios with a goal of offering its hospital clients integrated systems to maximize patient outcomes in infection prevention, respiratory care and acute care procedural effectiveness, BD executives said.

A change in market environment was the impetus for the deal, Vince Forlenza, chairman, CEO and president of BD said in a conference call Monday with investors.

"We do see the customer base changing rapidly around the globe," Forlenza said. "The hospitals have to do business differently. That requires the re-engineering of processes." One process the company will emphasize is putting together an end-to-end medication management system. "You can only do that if you have breadth," Forlenza emphasized.

He noted that BD was especially impressed with CareFusion's advancement in informatics.

"This is about solutions," he said. The buying process is moving up in the [health system] organization and they're looking for strategic partners," Forlenza noted.

BD's move makes this the third major med tech merger this year, along with Medtronic Inc. ( (MDT) ) buying Covidien plc ( (COV) ) and Zimmer Holdings Inc. ( (ZMH) ) acquiring Biomet Inc. It highlights "the importance companies continue to place on increased 'scale' in an evolving (post-ACA) heatlhcare environment," Leerink Partners LLC analyst Richard Newitter wrote in a note published Monday.

Once the transition is moving along nicely, Forlano said the company would still be seeking tuck-in acquisitions as needed.

BD has been extremely active in M&A, completing seven deals since 2011. Those deals include the $40 million acquisition of private diagnostic instrument company Alverix Inc. in January. The med tech also purchased Cato Software Solutions GmbH for an undisclosed sum in 2013.

BD acquired Safety Syringes — a company that specializes in the development of anti-needlestick devices for an undisclosed amount in 2012, completing the deal in 2013. It also purchased Sirigen Group Ltd. and Kiestra Lab Automation BV for undisclosed terms. In 2011, the company acquired Accuri Cytometers for $205 million and Carmel Pharma AB for $287 million.

The transaction is expected to close in the first half of 2015 and is conditioned on regulatory and CareFusion shareholder approvals and customary closing conditions. On closing, CareFusion shareholders would own about 8% of the combined company.

BD turned to Goldman, Sachs & Co.'s Jo Natauri and Jason Silvers for financial assistance. A team at Skadden, Arps, Slate, Meagher & Flom LLP, led by Paul Schnell, C. Michael Chitwood, Thomas Greenberg, Erica Schohn, Bruce Goldner, John Bentivoglio, Steven Messina, Laura Kaufmann Belkhayat, Clifford Aronson, Eric Sensenbrenner, Thomas Hughes and Sofie Bielen, provided legal advice.

CareFusion tapped Peter Weinberg and Christopher O'Connor at Perella Weinberg Partners LP and Barclays plc for financial advice. For legal advice on the transaction, CareFusion turned to Wachtell, Lipton, Rosen & Katz's David Katz, David Lam, Jeannemarie O'Brien, T. Eiko Stange, Nelson Fitts, Gregory Pessin, Iliana Ongun, Simone Ehrsam, Erica Bonnett, Michael Sabbah, Nathaniel Asker and Neil Snyder.

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