Waters Corp. announced Monday it will merge with Becton Dickinson’s biosciences and diagnostics unit in a $17.5 billion tax-free deal structured as a Reverse Morris Trust transaction. The move will create a combined testing, life sciences and diagnostics company with a projected $6.5 billion in revenue for 2025. It is also expected to double Waters’ total addressable market, resulting in a TAM of about $40 billion.
The merger will bring together “complementary capabilities,” and “a legacy of pioneering science” as well as a “shared, deep-rooted culture of innovation,” said Udit Batra, Ph.D., president and CEO of Waters, in a call with analysts.
The name of the combined entity will be Waters. Under the terms of the deal, Waters will issue 39.2% of its shares to BD shareholders and assume $4 billion of debt to acquire BD’s Biosciences and Diagnostic Solutions unit, according to Batra.
Leveling the playing field
The move will alter the playing field significantly in the regulated testing and diagnostics sectors. It will put the Waters/BD entity on a roughly level playing field with Agilent Technologies on a revenue scale. It will also narrow the gap with larger peers like Thermo Fisher Scientific TTM (revenue of $42.90 billion), Danaher (TTM revenue of $23.82 billion) and Roche Diagnostics (roughly $15.7 billion).
Analysts have framed the move as strategically sound, but flagged integration-related risks. Stifel analyst Daniel Arias described the deal as a “good fit” for Waters.
The merger comes as universities and academic research institutions, as well as early-stage drug discovery firms, have tightened their belts. Batra acknowledged that those markets had been “slow,” adding “we modeled a start of a slow recovery on that front.”
Optimizing for resilience
Resilience was a recurring theme in the analyst call. “One of the most compelling aspects of the combination is how it enhances our growth stability,” Batra noted. “If there’s one thing we could all benefit from in the tool space, it’s more consistency,” he continued.
He added that the merger would support “a more resilient and recurring growth profile” that would “bridge capex cycles.” He said that the merger also added “greater breadth across end markets and applications,” and noted that it reduced dependency “on any single segment.”
Waters stock was down almost 14% today at close, falling to $304.18 per share. Meanwhile, BD’s stock ticked up $1.12 (0.64%) to $177.09. BD’s stock, however, has dropped almost 22% year to date.
A slide deck notes that the fused entity will have a large total addressable market while also leading to bolstered growth stability. That is, more than 70% of revenue would be annually recurring with more than half of instruments replaced every five to 10 years.
After the deal, BD will become a pure-play medical device company focused on an array of products in that sector, including drug delivery devices, including syringes and infusion systems as well as catheters, balloons, and other surgical tools. MassDevice covered the proposed BD/Waters plan in February.
The companies expect that for 2025, the combined company will generate pro forma revenue of roughly $6.5 billion with adjusted EBITDA of approximately $2 billion. “Around 10% of product sales will be spent on R&D,” Batra said.
The new company will have about 16,000 employees and be headquartered in Milford, Massachusetts.
Julia Rock-Torcivia contributed to this article.
