What's going on?
On Tuesday, Boston Scientific – the $50 billion American maker of medical devices – agreed to buy British healthcare firm BTG for $4.2 billion.
What does this mean?
Boston Scientific makes medical essentials like stents, which hold open damaged blood vessels. It wants to buy BTG in order to expand into (depressingly) high-growth areas of medicine like cancer and blood clots. Among other things, BTG makes tiny products that doctors insert into patients’ bodies during minimally invasive surgery. BoSci believes that buying BTG will bring new, complementary areas of expertise to the combined company.
Why should I care?
For markets: Papering over expensive cracks?
Boston Scientific is no stranger to acquisitions – the company has cut more than 20 deals in the last five years – but BTG is its biggest since 2005. And while BTG’s share price jumped 34% on Tuesday, close to the deal price, the buyer’s fell 7%. Boston Scientific’s in the midst of a restructuring intended to shave $100 million off costs, in part by cutting jobs. Adding BTG’s 1,600 employees to its existing 29,000 probably means even more job losses are likely in the future. After all, the very existence of a restructuring plan may suggest the company’s struggled to deliver the “synergies” promised by its previous acquisitions.
The bigger picture: More M&A on the way?
A third of BTG’s sales currently comes from pharmaceutical products – including antidotes for drug overdoses and rattlesnake venom. That doesn’t really gel with Boston Scientific’s hardware-focused business – and the company hasn’t yet decided what it’ll do with that part of BTG. If BoSci decides to sell, it could find a buyer in the guise of European pharma companies, which spent the first half of 2018 chopping and changing their businesses to focus more on dismayingly trendy areas like tumor-treating oncology – and are perhaps keen to take advantage of lower valuations of UK pharma companies compared to global rivals.