Becton Dickinson aims to split the Biosciences unit, just as the right board wants the same thing


Pavlo Gonchar | SOPA Images | Lightrocket | Getty Images

Company: Becton Dickinson and Co (BDX)

work: Becton Dickinson We develop, manufacture and sell medical supplies, devices, laboratory equipment and diagnostic products for medical institutions, physicians, life science researchers, clinical laboratories, pharmaceutical industry and the public around the world.

Stock market value: ~$66.65B ($229.85 per share)

Stock chart iconStock chart icon

Hide content

Becton Dickinson has been sharing it over the past 12 months

Activist: The Value of the Right Board

Owned: ~0.70%

Average cost: n/a

Activist commentary: Starboard is a highly successful activist investor and has extensive experience to help businesses focus on improving operational efficiency and margins. The right board also has important experience in strategic activities. In 57 previous campaigns with strategic papers, the company scored a 32.96% return against 14.61% in the same period. Additionally, Starboard launched activist campaigns with 24 previous healthcare companies, with an average return rate in these situations of 17.65%, an average of 9.57% for the Russell 2000 at the same time.

what’s happening

Behind the scenes

Becton Dickinson (BDX) is a global medical technology company consisting essentially of two businesses. (i) BD Medical (drug delivery and management solutions, advanced monitoring and pharmaceutical systems) and BD interventions (MedTech consisting of vascular and urinary products, oncology and surgical specialties) and (ii) BD Life Sciences , products for the collection and transport of diagnostic specimens, as well as equipment and reagent systems to detect a variety of infectious diseases. Within MedTech, BDX is the market leader in the infusion pump and prefill input syringe business, overcharged by the growth of the GLP-1’s popularity. Though these two businesses have historically similar sizes, MedTech has grown faster, with revenues of $15.1 billion and profits of $6.7 billion before interest, tax, depreciation and amortization occupies the following. .

The problem here is simple and simple. The company operates two different businesses in different stages with different growth rates and multiples of valuation, and there is no real reason to be under the same roof. MedTech business has a higher growth rate (medium numbers) than Life Sciences (low single numbers), while MedTech has several times (13 to 14 times) than Life Sciences (over 20 times). It is evaluated as a rule for 40 companies. That is, its growth rate and its operating margin must be equal to or greater than 40. Life sciences are considered more structurally stable and immune to things like circulatory, resulting in reduced exposure to reimbursement pressures. Additionally, the presence of players in major industry like Thermo Fisher and Danaher gives Life Sciences Business a bit of integration value that will slightly boost its valuation double.

This isn’t necessarily a problem, but with BDX, the whole company trades at 16.8 times the EBITDA, which is close to the value of the most unworthy parts. As the right board recommends, spinning or selling a life science business is a simple solution to a simple problem. Creating value in the short term here is easy. If separated, MedTech businesses should get an EBITDA rating of 13x to 14x based on growth, while Life Sciences should get a 20x North rating. That alone gives a North valuation of $110 billion on low ends across multiple ranges. However, there is the creation of added value that can be achieved after separation. The ability to make management better through the success of your own department and to expand the universe of potential investors into two pure businesses are separate table stakes. The real value comes from the ability of two separate management teams to focus on their business and devote their resources. In the case of BDX, it could lead to improved margins through acquisition integrations that have been somewhat neglected as part of a large company. There is a report of Life Sciences Business’s $30 billion valuation price. This is a rating that is slightly below the expected 20x EBITDA multiple that we think we can receive. I think that’s because BDX could potentially retain some parts of the life sciences business that will become synergistic with MedTech.

This isn’t necessarily a problem, but with BDX, the whole company trades at 16.8 times the EBITDA, which is close to the value of the most unworthy parts. As the right board recommends, spinning or selling a life science business is a simple solution to a simple problem. Creating value in the short term here is easy. If separated, MedTech businesses should get an EBITDA rating of 13x to 14x based on growth, while Life Sciences should get a 20x North rating. That alone gives a North valuation of $110 billion on low ends across multiple ranges. However, there is the creation of added value that can be achieved after separation. The ability to make management better through the success of your own department and to expand the universe of potential investors into two pure businesses are separate table stakes. The real value comes from the ability of two separate management teams to focus on their business and devote their resources. In the case of BDX, it could lead to improved margins through acquisition integrations that have been somewhat neglected as part of a large company. There is a report of Life Sciences Business’s $30 billion valuation price. This is a rating that is slightly below the expected 20x EBITDA multiple that we think we can receive. I think that’s because BDX could potentially retain some parts of the life sciences business that will become synergistic with MedTech.

The right board is known as a very hardworking, persistent, and committed activist investor who does what is necessary to do to do whatever it takes to create value for investors and other shareholders. When a company wants a board sheet, it usually gets a board sheet. But that’s not the case here. Starboard’s “activist” skills may be wasted here or not necessary, as in this case the company appears to be pushing an open door rather than breaking it. BDX has already confirmed this issue, and Consider selling of the Life Sciences segment. Is this because the company is considering this anyway, or whether it’s irrelevant to what the right board has heard loudly and clearly. The right board is the type of activist who doesn’t care who gets credit, as long as the best decisions are made for shareholders.

Ken Squire is the founder and president of 13D Monitor, an institutional research service for shareholder activity, and is the founder and portfolio manager of 13D Activist Fund, a mutual fund investing in a portfolio of activist 13D investments.

Leave a Reply

Your email address will not be published. Required fields are marked *