The fevered pitch of mergers and acquisitions activity in the health care sector is continuing with news out Sunday afternoon that Becton Dickinson (NYSE: BDX) will acquire rival CareFusion (NYSE: CFN) in a deal worth $12.2 billion in cash and stock.
BDX will pay $58 per share for CareFusion, an almost 26% premium to where the latter’s shares closed last Friday. The deal is expected to be completed in the first half of 2015, according to a statement issued by the companies.
In terms of exchange traded funds, news of the Becton Dickinson/CareFusion marriage turns attention to the iShares U.S. Medical Devices ETF (NYSEArca: IHI). Becton Dickinson is IHI’s seventh-largest holding with a weight of almost 4.6%. CareFusion accounts for 2.2% of IHI’s weight. Based on Friday’s closing market values, the two companies have a combined market value of about $31.6 billion, just above Stryker’s (NYSE: SYK) $31.2 billion. Stryker is IHI’s sixth-largest holding. [Medical Devices ETF Thwarts Obamacare]
This is not IHI’s first dalliance with big takeover news this year. The ETF is up nearly 11% year-to-date due in part to takeover speculation and announced deals.
One of those announced deals emerged in June when Medtronic (NYSE: MDT) said it would acquire Covidien (NYSE: COV) for $40 billion. Those stocks combine for nearly 18% of IHI’s weight. [Medical Device Marriage Helps This ETF]
However, that deal and others within the health care sector have recently come under scrutiny as the U.S. Treasury Department looks to crack down on U.S. firms acquiring rivals with foreign domiciles so that they can avoid paying U.S. taxes. More recently, inversions have occurred after large U.S. companies merged with smaller foreign firms. The U.S. company would reincorporate in a tax-friendlier country, like Ireland, while maintaining much of their core operations in the U.S. [Inversion Crackdown Affects Health Care ETFs]
Becton Dickinson’s acquisition of CareFusion does not raise the specter of inversion scrutiny because the former is based in New Jersey while the latter calls San Diego home. IHI has $744 million in assets under management, over $227 million of which have come into the ETF this year.
iShares U.S. Medical Devices ETF
