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Hill-Rom (HRC) to Boost Cardiology Portfolio with New Buyout

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Hill-Rom Holdings, Inc. HRC has inked a deal to acquire Bardy Diagnostics, Inc. – a digital health provider of ambulatory cardiac monitoring technologies. The acquisition will allow Hill-Rom to accelerate its digital health offering through expansion into the lucrative ambulatory cardiac monitoring space.

For investors’ note, Bardy Diagnostics was established in 2013 with an objective to enhance clinical management and improve patients’ outcomes by bringing advanced electrocardiography detection into patient friendly technologies.

Notably, the agreement is expected to close in the fiscal second quarter of 2021, subject to customary closing conditions.

With this buyout, Hill-Rom continues to strengthen its merger and acquisition (M&A) pipeline. It is important to mention here that the company aggressively pursues acquisitions to accelerate growth in five key clinical focus areas, viz. advancing patient mobility, wound care and prevention, surgical, safety and efficiency, clinical workflow solutions, and respiratory help.

Financial Terms of the Deal

Per the terms of the agreement, Hill-Rom will acquire Bardy Diagnostics for $375 million in cash plus future potential payments post achievement of certain commercial milestones. Additionally, the company is also acquiring net operating losses worth $20 million, which are anticipated to result in future tax benefits.

The company expects the buyout to be dilutive to its fiscal 2021 adjusted earnings by about 10 cents per share, but does not expect an impact on its previously issued financial outlook. The transaction is expected to be increasingly accretive after the first year, and generate a 10% return on invested capital by the fifth year.

Significance of the Acquisition

The buyout will bring an advanced diagnostic cardiology platform to Hill-Rom along with a team of substantial clinical and scientific experts and independent diagnostic testing facilities that will enable the company to enhance patient’s outcome.

Through this planned acquisition, Hill-Rom will obtain Bardy Diagnostics’ differentiated, wearable bio-sensing technology, the Carnation Ambulatory Monitor (CAM patch) that has been developed for superior clinical accuracy, patient-comfort as well as outstanding diagnostic yield. This will complement Hill-Rom’s current cardiology portfolio of cardiac stress exercise, Holter and resting electrocardiography devices.

Industry Prospects

Per a report by MarketsandMarkets, the global cardiac monitoring and cardiac rhythm management devices market was valued at $22.1 billion in 2020 and is projected to reach $26.8 billion by 2025, growing at a CAGR of 4.0%. Rising incidence of cardiovascular diseases and the launch of advanced products by prominent market players are driving the market. Moreover, the outbreak of COVID-19 has increased the preference for remote monitoring of patients with cardiovascular conditions, reducing risk of infection.

Hence, the acquisition by Hill-Rom is well-timed.

Price Performance

In past three months, shares of the company have gained 12.3% compared with the industry’s growth of 6.7%.

Zacks Rank and Key Picks

Currently, Hill-Rom carries a Zacks Rank #3 (Hold).

Some better–ranked stocks from the broader medical space include Bovie Medical Corporation APYX, Myomo, Inc. MYO and OraSure Technologies, Inc. OSUR each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Bovie Medical has a projected long-term earnings growth rate of 28%.

Myomo has a projected long-term earnings growth rate of 23%.

OraSure Technologies has an estimated long-term earnings growth rate of 629%.

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HillRom Holdings, Inc. (HRC) : Free Stock Analysis Report
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