Fitch: Healthcare Consolidation Strategy Is More than Tax Plays

NEW YORK--()--The planned $12.2 billion acquisition of CareFusion by Becton Dickinson brings the focus back to the business strategy behind the recent rash of merger and acquisition activity in the global healthcare sector, Fitch Ratings says. Some recently announced transactions, including Medtronic's planned acquisition of device maker Covidien for $49.2 billion, are enhanced by tax synergies afforded to US firms re-domiciling in another national jurisdiction.

While tax synergies are encouraging deal making, Fitch expects more transactions in the medical device and supplies space to be driven primarily by strategic business goals. Companies in this sector face an evolving operating landscape. The challenge of adjusting business models coupled with an attractive financing environment are the basis for expectations that deal-making in the sector will continue, rather than tax synergies.

Becton Dickinson's deal for CareFusion highlights operating environment factors that are encouraging consolidation in the sector. Customers of medical device and supply manufacturers, namely hospital and physicians, are consolidating. Healthcare providers are also becoming increasingly price conscious as they attempt to shore up profitability in an environment characterized by weak growth in developed markets and an increased focus on value in healthcare delivery by payors and consumers.

Building a platform for growth in emerging markets will also serve as a basis for deals. Demand for healthcare products and services in emerging markets will outpace that in the developed markets, and companies want to be positioned to capture this growth. While Becton's acquisition of CareFusion skews overall profit mix more heavily toward the US out of the box, one significant component of the acquisition strategy involves the distribution of CareFusion products through Becton's non-US channels.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Contacts

Fitch Ratings
Megan Neuburger, CFA
Senior Director
+1 212-908-0501
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Robert Kirby, CFA
Director
Corporates
+1 312-368-3147
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL
or
Jacob Bostwick, CPA
Director
US Corporates, Healthcare
+1 312-368-3169
or
Kellie Geressy-Nilsen
Senior Director
Fitch Wire
+1 212-908-9123
or
Media Relations
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Megan Neuburger, CFA
Senior Director
+1 212-908-0501
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Robert Kirby, CFA
Director
Corporates
+1 312-368-3147
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL
or
Jacob Bostwick, CPA
Director
US Corporates, Healthcare
+1 312-368-3169
or
Kellie Geressy-Nilsen
Senior Director
Fitch Wire
+1 212-908-9123
or
Media Relations
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com