BD Partners With Waters to Build High-Volume Diagnostics Leader

Becton, Dickinson and Company BDX, popularly known as BD, and Waters Corporation WAT recently announced a strategic collaboration to combine BD’s Biosciences Diagnostic Solutions business with Waters’ expertise in analytical technologies. This joint venture aims to create a new life sciences and diagnostics entity focused on regulated, high-throughput testing, addressing the growing global demand for standardized and scalable diagnostic workflows.

The transaction has been unanimously approved by the boards of both companies and is expected to close by the end of the first quarter of 2026, subject to regulatory approvals, Waters’ shareholder approval and customary closing conditions.

From BD’s perspective, the partnership strengthens innovation in diagnostics by combining Waters’ analytical systems with BD’s clinical expertise, enabling integrated solutions that boost lab efficiency, support regulatory compliance and improve patient outcomes.

Likely Trend of BDX Stock Following the News

Following the announcement, shares of the company traded flat till yesterday’s closing. Shares of the company have lost 21.9% in the year-to-date period. However, the S&P 500 has gained 6.1% in the same time frame.

In the long run, combining BD’s Biosciences Diagnostic Solutions with Waters allows BD to streamline its focus on core segments while retaining a stake in a high-growth diagnostics venture. This move unlocks value from a non-core asset and positions BD to benefit from rising demand in regulated, high-throughput testing driven by precision medicine trends.

BD currently has a market capitalization of $50.76 billion. It has an earnings yield of 8.1%, which is higher than the industry’s 5.3%. In the last reported quarter, the company delivered an earnings surprise of 2.1%.

Strategic & Financial Benefits of the Combined Company

The merger of BD’s Biosciences & Diagnostic Solutions business with Waters is likely to create a leading player in life sciences and diagnostics, with a strong focus on regulated, high-throughput testing. The combined company is expected to offer a comprehensive portfolio across liquid chromatography, mass spectrometry, flow cytometry and diagnostics, positioning it well to serve fast-growing, highly regulated end markets.

The total addressable market is anticipated to double to approximately $40 billion, enabling broader access to adjacent segments such as biologics, bioanalytical characterization and multiplex diagnostics.

The business model is also expected to be financially robust, with over 70% of revenues likely to be recurring annually. A significant portion of instrument-related revenues is expected to follow a five- to ten-year replacement cycle, providing long-term stability. For 2025, the combined company is projected to generate approximately $6.5 billion in revenues and $2.0 billion in adjusted EBITDA. Between 2025 and 2030, revenue growth is likely to grow in the mid-to-high single digits annually, while adjusted EPS growth is projected to be in the mid-teens range. By 2030, the company is expected to deliver around $9 billion in revenues, $3.3 billion in adjusted EBITDA and an adjusted operating margin of 32%.

Transaction Structure & Synergy Potential

The transaction is structured as a tax-efficient Reverse Morris Trust, with an implied value of approximately $17.5 billion. Under the terms of the deal, BD is expected to spin off its Biosciences & Diagnostic Solutions business to its shareholders, followed by a merger with a wholly owned subsidiary of Waters. As a result, BD shareholders are likely to own approximately 39.2% of the combined company, while existing Waters shareholders would retain around 60.8%. BD is also set to receive a cash distribution of about $4 billion before the transaction closes, which is expected to support both shareholder returns and debt reduction.

The deal is structured to deliver both cost and revenue synergies over time. Approximately $200 million in cost synergies are projected by the third year post-closing, mainly through efficiencies in manufacturing, supply chain management, and SG&A functions. Around $290 million in revenue synergies are expected by the fifth year, supported by stronger commercial execution, broader access to new customer segments, and cross-selling opportunities. Combined, these synergies are likely to result in annualized EBITDA gains of about $345 million by 2030, reinforcing the transaction's long-term value creation potential.

BDX’s Zacks Rank & Key Picks

Currently, BD carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are Phibro Animal Health PAHC and Cencora COR. While Phibro Animal Health sports a Zacks Rank #1 (Strong Buy) at present, Cencora carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for Phibro Animal Health’s fiscal 2025 earnings per share have remained constant at $2.04 in the past 30 days. Shares of the company have surged 75% in the past year compared with the industry’s 10.8% growth. Its earnings yield of 7.5% compares comfortably with the industry’s 1% yield. PAHC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 30.6%.

Cencora shares have rallied 32.8% in the past year. Estimates for the company’s fiscal 2025 earnings per share have increased 0.4% to $15.81 in the past 30 days. COR’s earnings beat estimates in each of the trailing four quarters, the average surprise being 6%. In the last reported quarter, it posted an earnings surprise of 8.3%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research