On Monday, Edwards Lifesciences Corporation (NYSE: NYSE:EW) reached a definitive agreement to sell its Critical Care business to Becton, Dickinson and Company (NYSE: BDX) for $4.2 billion in cash. The transaction is valued at approximately 4.4 times the segment's trailing twelve months (TTM) sales.
Edwards Lifesciences had previously indicated during its investor day in December that it would seek a spin-off for this segment. However, the company has shifted gears, opting for a sale instead. The expected closure of the deal by the end of 2024 coincides with the original timeline set for the spin-off. Edwards anticipates that the deal's impact on its adjusted earnings per share (EPS) in 2024 will be negligible, provided the transaction concludes as planned.
The proceeds from the sale, after taxes, are intended for strategic growth investments. Edwards Lifesciences plans to continue its disciplined investment in technologies for treating heart conditions, specifically targeting aortic, mitral, tricuspid, and pulmonic valves, as well as exploring new therapeutic areas for interventional heart failure.
The sale is also expected to enhance Edwards's financial profile in 2025. Becton, Dickinson's press release projects that the acquired business will achieve adjusted gross margins (GM) of at least 60% and adjusted operating margins (OM) of at least 25%. This is in contrast to Edwards's full corporate average GM of 77.1% and OM of 28.9% for the fiscal year 2023. The completion of this deal is anticipated to bolster Edwards's margin profile moving forward.
InvestingPro Insights
As Edwards Lifesciences Corporation (NYSE: EW) navigates through the sale of its Critical Care business, investors and stakeholders are keenly observing its financial health and market position. According to real-time data from InvestingPro, Edwards Lifesciences boasts a market capitalization of $52.36 billion, highlighting its significant presence in the industry. The company's P/E ratio stands at 36.76, suggesting investors may anticipate future growth, despite it trading at a high earnings multiple. Notably, the stock has experienced a large price uptick over the last six months, with a 27.11% return, reflecting robust investor confidence.
From an operational standpoint, Edwards Lifesciences demonstrates a strong financial foundation, with gross profit margins at an impressive 76.63% for the last twelve months as of Q1 2024. This indicates efficient management and a potentially favorable outlook for profitability. Additionally, the company's ability to generate consistent cash flows, which can sufficiently cover interest payments, is a reassuring sign of financial stability, as per InvestingPro Tips.
Investors considering Edwards Lifesciences can further explore these metrics and gain additional insights with InvestingPro. There are 6 more InvestingPro Tips available for Edwards, which can be accessed through the platform. For those interested in a deeper analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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