"New" Becton Dickinson

Becton Dickinson (“BDX”) is a storied, if stodgy, business. Founded 128 years ago in New Jersey, BDX makes a broad range of medical supplies and laboratory equipment. In July BDX announced plans to monetize its Biosciences & Diagnostics Solutions businesses via a Reverse Morris Trust transaction with Waters Corporation (WAT). These segments account for 15% of company-wide revenue ($3.3 billion).

First, BDX will receive a $4 billion dividend from its Biosciences & Diagnostics Solutions businesses, funded by new debt. Then, BDX will spin off these segments, with the spinCo immediately merging with Waters Corporation. When the dust settles, BDX shareholders will own the BDX remainCo (“New BD”) as well as ~0.13 shares of new Waters Corp for each share of BDX. The transaction has been cleared by the FTC and is expected to close by the end of Q1 2026.

Waters trades for $389 per share, so 0.13 shares is worth ~$50. Backing that out of BDX’s $200 per share price gets us to $150 per share. That’s 10x expected New BD earnings. Adding the $4 billion of cash brings the total consideration to $65 per share for New BD shareholders.

In November Thomas Polen, BDX’s Chairman, President, and CEO said, “we see the intrinsic value of the company significantly higher than it’s trading today.” This isn’t just lip service. BDX initiated an incremental $250 million buyback, effective immediately, to capitalize on the valuation disconnect. They’ve also committed to using “at least” half of the $4 billion of proceeds for buybacks at New BD. That’s enough to repurchase 5% of New BDX.

BDX is a good business. 90% of its products are low-cost essential consumables used daily in large volumes in hospitals around the world.