Mega MedTech Merger
Siemens has bought Varian, and the Invstr community saw it coming. These healthcare giants have collaborated for decades on cancer treatments, and now finally unite their market share. Varian is up 25% on this news and not a single user is caught selling short. Well played!
It’s a big deal, literally; $16.4 billion; the biggest MedTech acquisition of 2020. It’s important for investors to look at how the $16.4 billion will be paid, though. In this case, Siemens is taking on debt, which normally increases the risk profile of a stock and pushes it down.
It’s also planning to issue new shares to investors, which is a sale to raise funds. The new shares will dilute the value in all that remain, which, again, will push them down.
The good news for investors in the Siemens-Varian deal is that technically, this is the Siemens Healthineers-Varian deal. Healthineers is a majority-owned subsidiary to Siemens, and it’s going about the dilution alone with its own shares. Siemens investors are mostly safe.
It’s also important to note that the lender to Siemens Healthineers is another of Siemen’s majority-owned subsidiaries, its financial branch. Siemens is bound to cut Siemens a sweetheart deal, so all of this mutes the downside in Siemens stock. These are the nuts and bolts of a big deal, and sometimes, like this time, they make all the difference!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.