Starboard Value, a prominent activist investor, has taken a stake in medical technology giant Becton Dickinson and is urging the company to sell its life sciences division. The hedge fund believes the unit, which generates a quarter of Becton Dickinson's revenue, is worth more when separated. Becton Dickinson is already exploring a spin-off and other shareholders have also been pushing for this move.
Activist investor Starboard Value has taken a position in Becton Dickinson and is urging the $72 billion medical technology company to sell its life sciences division, according to sources familiar with the matter. The hedge fund has met with the group's management team and sent a letter to the board recommending the company divest or spin off the unit, which produces products used in clinical and research laboratories. The size of Starboard's stake is unclear.
Becton Dickinson's shares have lagged behind rivals and the S&P 500 index in recent years, gaining just 4.4 percent in the past year compared to a nearly 22 percent rise in the S&P 500. Shares in Becton Dickinson surged as much as 3 percent in pre-market trading after Starboard's stake was revealed. The New Jersey-based company is already working with advisers on plans for a potential spin-off of its life sciences division, which could fetch between $33 billion and $35 billion, based on valuations of industry peers, separate sources said. Bloomberg first reported Becton Dickinson hiring advisers. Other shareholders have also begun pushing for Becton Dickinson's management and board to spin out the life sciences division, but Starboard's arrival on the company's shareholder register is likely to add urgency to the process, according to the sources. The unit generated $5.2 billion, or approximately a quarter of Becton Dickinson's total revenues, in the year to the end of September 2024. Becton Dickinson declined to comment. Starboard did not immediately respond to requests for comment. Analysts at investment banks have argued in recent months that Becton Dickinson would benefit from separating the unit. In December, Bank of America analysts wrote that the “sum of the parts is getting too wide to ignore” and that splitting the business from the rest of the group could lead to an increase of as much as 30 percent in value. Starboard, run by co-founder Jeff Smith, is among the most prominent activist investors on Wall Street. Some of its high-profile campaigns have targeted technology company Salesforce and Tinder parent Match Group. Starboard's assets under management total more than $9 billion. Recently, the fund has built several positions in the healthcare sector. In October, Starboard unveiled a $1 billion stake in pharmaceutical company Pfizer, which has suffered from a declining share price after developing one of the most successful Covid-19 vaccines. The hedge fund also revealed in the same month its stake in Kenvue, the consumer health group behind Tylenol that was spun out of Johnson & Johnson. The activist investor later nominated five directors to the board. Sprawling conglomerates including Honeywell and London-listed Smiths Group have grappled with shareholders demanding break-ups, with investors convinced that parts of the companies are worth more than the whole combined. Becton Dickinson has split off business units before. The group spun out diabetes device maker Embecta in April 2022, but the company's stock has struggled as a separate business, with its share price sinking about 60 percent since the listing. “We always evaluate our portfolio and we’re constantly looking at what creates the most shareholder value,” said Tom Polen, chair and chief executive of Becton Dickinson, at a conference in September in response to a question about whether the group would consider spinning out the unit. “We always look and say . . . are we the best owner for this business? I mean, that’s the key question.
ACTIVIST INVESTOR STARBOARD VALUE BECTON DICKINSON LIFE SCIENCES SPIN-OFF SHAREHOLDER VALUE
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