Boston Scientific Plunges After $4.2 Billion Medical Device Deal
(Bloomberg) -- Shares of Boston Scientific Corp. fell the most in more than three years Tuesday, after the medical device company said it would buy BTG Plc for 3.3 billion pounds ($4.2 billion).
While the deal will give Boston Scientific new products for the treatment of cancer and other disorders, it will add to the U.S. company’s debt. It also likely takes the company out of consideration as a takeover target itself, said Jefferies health-care strategist Jared Holz, who called it a “strange” move by the company.
Boston Scientific “has takeout speculation in shares and thus doing a deal will be a perceived negative as far as the stock is concerned,” Holz said in a note to clients. The shares fell as much as 11 percent, the biggest intraday drop since August 2015. They were down 6.1 percent to $33.15 at 9:56 a.m. in New York.
Boston Scientific, a maker of stents that hold open damaged blood vessels, will pay 840 pence in cash per share, a 37 percent premium over BTG’s Monday closing price, according to a statement. BTG surged as much as 35 percent, a record gain, reaching their highest level in almost four years in London trading.
BTG makes medical technology for physicians, such as cryoablation products to freeze and destroy diseased cells and radiotherapy that delivers radiation straight to tumors. The company also makes medicines and antidotes against snake venom for emergency care. BTG garnered $496 million in revenue in the first half of the year.
The acquisition “will augment our capabilities in important areas of unmet need” such as cancer and harmful blood clots, Boston Scientific Chief Executive Officer Michael Mahoney said in the statement.
The transaction would be funded with a combination of cash on hand and borrowing. Boston Scientific said it would likely add two to three cents to its adjusted earnings per share next year and more thereafter. Investors with 33 percent of BTG’s outstanding shares have pledged to vote in favor of the deal, the company said.
The offer, which represents a 50 percent premium to BTG’s 90-day trading average, is a good value for shareholders who have “witnessed a turnaround in BTG and see it develop into an interventional medicine company with a focused approach and growing portfolio,” Adam Barker, an analyst with Shore Capital, said in an email.
The purchase is Boston Scientific’s biggest since 2005, when it acquired device maker Guidant for $25.2 billion, according to data compiled by Bloomberg. Earlier this month, BTG agreed to invest $20 million in Veran Medical Technologies Inc., with an option to buy the rest of the St. Louis, Missouri-based device maker.
London-based BTG traces its origins to the U.K.’s National Research Development Corp., which was set up in the 1940s to commercialize publicly funded research. It was privatized in 1992.
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