Company: Becton Dickinson and Co (BDX)
Becton Dickinson, widely recognized as BDX, is a global leader in the medical technology field. They specialize in developing, manufacturing, and selling a wide range of products including medical supplies, devices, laboratory equipment, and diagnostic tools. These essential items serve a variety of clients, from healthcare institutions and physicians to life science researchers, clinical laboratories, and sectors within the pharmaceutical industry across the globe. Valued at approximately $66.65 billion with each share priced around $229.85, BDX is a major player in its domain.
Activist: Starboard Value
Starboard Value, owning about 0.70% of BDX, is a name that resonates well in the world of activist investing. Known for its strategic insights and operational expertise, Starboard has a track record of guiding companies toward improved efficiency and enhanced profit margins. The firm has a notable history of success, with its strategic activism yielding returns of 32.96% over 57 past campaigns, a remarkable feat compared to the Russell 2000’s 14.61% during the same periods. With 24 health-care companies already under its belt, Starboard averages an impressive 17.65% return, significantly outperforming the Russell 2000’s 9.57% at the same times.
What’s Happening
In early February, Starboard declared its investment in Becton Dickinson with a mission: separate the company’s life sciences division. Just days later, BDX announced plans to spin off its biosciences and diagnostics solutions segment, indicating alignment with Starboard’s vision.
Behind the Scenes
Becton Dickinson is structured around two major businesses. First, the MedTech segment, which includes BD Medical and BD Interventional, focuses on a range of products from medication delivery and management to surgical specialty equipment. Second, BD Life Sciences offers tools essential for diagnostics and detecting diseases. Each segment has its strengths, with MedTech leading the market in infusion pumps and prefilled syringes, especially benefiting from the rise of GLP-1s. Although historically similar in size, MedTech’s rapid growth now sees it contributing significantly more to revenue and earnings compared to Life Sciences.
The fundamental issue isn’t too complex: BDX operates two vastly different business entities with varying growth rates and valuation metrics, yet they sit under one corporate umbrella. MedTech, enjoying a healthy growth rate, has a modest valuation multiple compared to the structurally stable Life Sciences, which enjoys a higher valuation due to less exposure to reimbursement risks and cyclicality.
Currently, the total value of BDX is based more on its lower-valued division. Starboard’s advocacy for the spin-off is a logical path forward. If MedTech and Life Sciences operate independently, their true value could be realized, potentially elevating BDX’s overall valuation past $110 billion. The separation would also allow each management team to sharpen focus, leading to better motivation and resource allocation, and an enticing prospect for investors valuing pure-play enterprises.
This strategic split could also reveal underutilized acquisition opportunities, which might have been overlooked within the larger corporate structure. Reports predict the Life Sciences segment might fetch a valuation close to $30 billion, slightly below expectations, as BDX may retain some synergistic aspects with MedTech.
Starboard has a reputation for being a firm yet focused activist, clearly set on maximizing value for investors. In this case, however, they might find BDX to be already moving in the recommended direction. The company’s announced intentions to divest its Life Sciences segment suggest a responsive board ready to align with strategic recommendations. Regardless of whether this was pre-planned or prompted by Starboard’s involvement, what matters most to Starboard is the alignment of interests for the benefit of all shareholders.
About Ken Squire
Ken Squire serves as founder and president of 13D Monitor, a research service specializing in shareholder activism. Additionally, he manages the 13D Activist Fund, a mutual fund with a portfolio centered on activist 13D investments, offering insights and strategic guidance to those within the finance community.
