CR Bard execs know they have a gorilla of a competitor in the proposed $43 billion Medtronic acquisition of Covidien, particularly in the vascular business.
They aren’t predicting the effects of that business combination on Bard, but are looking seriously at making some acquisitions of their own. They’re just going to tread carefully.
“Historically, I've always said we wouldn't be afraid or shy away from doing a big deal,” Bard chairman and CEO Timothy Ring told analysts during last week’s second-quarter earnings phone call, transcribed by Seeking Alpha. “It would just have to be so strategically compelling to us that it would make sense to us and then, thus, to shareholders.”
Bard's vascular business provided $233 million in 2Q net sales, up 10% from the same quarter a year ago. That accounted for 28% of total net sales for the quarter of $827 million, an increase of 8%.
The company has more than $1 billion at its disposal to fund acquisitions, according to Christopher S. Holland, Bard’s chief financial officer and senior vice president.
Holland said Bard is “actively evaluating lots of opportunities” and has “a lot of capacity” to fund strategic investments.
“The fact that we haven't done anything this year doesn't mean that we don't have an interest and we don't have the capacity to do additional transactions,” Holland told analysts during the second-quarter earnings call last week. “They need to make sense strategically and financially. And when we do find ones that meet these filters that we have, we believe between the balance sheet and access to capital, we can certainly finance what we need to get done.”
Lawsuit settlements over pelvic floor devices would not affect M&A activity, because those products were manufactured overseas and payouts would come from overseas, according to Ring.
“It doesn't implicate our ability to pursue strategic opportunities as we find them, he said.
Bard’s last major acquisition, announced in September 2013, wasof urinary incontinence and drainage company Rochester Medical (Stewartville, MN) for about $262 million.
If Bard does not find the right merger and acquisition opportunities this year, it will return that money to shareholders through stock buybacks and dividends, Holland said.
Refresh your medical device industry knowledge at MEDevice San Diego, September 10–11, 2014.
Federal regulatory concerns over the Medtronic-Covidien merger may buy Bard some time. The problem for Medtronic is that the deal is a “corporate inversion” deal that would allow the Fridley, MN– based company to move its headquarters to Ireland, where Covidien is based. In the process, Medtronic could possibly avoid having to pay taxes on the billions of dollars it has amassed outside the United States.
Other deals could suffer if regulators prevail. Stryker appears to be eyeing London-based Smith & Nephew.
Nancy Crotti is a contributor to Qmed and MPMN.
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