Activist investor Starboard argues that separating Becton Dickinson's Life Sciences division from its MedTech business would unlock significant value for shareholders. The company is currently undervalued due to the disparate growth rates and valuations of its two operating segments.
Becton Dickinson (BDX) is a global medical technology company with two main businesses: MedTech and BD Life Sciences . MedTech focuses on medication delivery, monitoring, and pharmaceutical systems, as well as interventional products for various specialties. BD Life Sciences provides tools for collecting and transporting diagnostic specimens, along with instruments and reagents for detecting infectious diseases.
Historically, these two businesses were similar in size, but MedTech has been growing faster and now accounts for a larger portion of BDX's revenue and earnings. The issue lies in the fact that BDX operates two distinct businesses at different stages with varying growth rates and valuation multiples. MedTech, with its mid-single-digit growth rate, has a lower valuation multiple (13-14 times) compared to Life Sciences (over 20 times) due to its assessment as a 'rule of 40' company. Life Sciences, on the other hand, is considered more stable and less susceptible to cyclicality and reimbursement pressure. Activist investor Starboard, known for its focus on operational efficiency and margin improvement, has called for the separation of BDX's Life Sciences division. They argue that this separation would unlock significant value for shareholders. If separated, MedTech should receive a valuation closer to 13-14 times EBITDA based on its growth, while Life Sciences could command a valuation above 20 times. This alone would push BDX's valuation above $110 billion at the low end of the multiple range. Furthermore, separate management teams could better focus on and allocate resources to their respective businesses, potentially leading to margin improvement through optimized integration of acquisitions. Reports suggest a $30 billion valuation for Life Sciences, slightly below the 20 times EBITDA multiple expected due to BDX potentially retaining some synergistic parts. The potential for value creation through separation makes Starboard's recommendation a compelling one for BDX shareholders
Becton Dickinson Life Sciences Medtech Starboard Value Activist Investing Corporate Spinoff Value Creation
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