Quidel to Acquire Ortho for $6B; Shares Slide 17%

Quidel Corporation (NASDAQ: QDEL), one of the largest American manufacturers of diagnostic healthcare products, has agreed to snap up Nasdaq listed Ortho Clinical Diagnostics Holdings plc (OCDX) in a cash and stock deal worth $6 billion.

The company will acquire one of the world’s largest in-vitro diagnostics companies for $24.68 per share of common stock, including $1.75 billion in cash. The price per share represents a 25% premium over Ortho’s closing price on December 22, 2021. Additionally, Ortho’s existing net debt of $2 billion will be acquired by the combined company.

Following the deal announcement, shares of Quidel plummeted 17.5% on Thursday on fears of equity dilution and increased debt, while shares of Ortho rose 6.9%.

Benefits of the Acquisition

Through the combined entity’s superior technologies and platforms, customers will gain expanded access to clinical chemistry, immunoassay, molecular diagnostics, immunohematology, donor screening, and point-of-care diagnostics offerings. Furthermore, the company is expected to benefit patients, customers, and suppliers, providing greater opportunities.

Additionally, an acceleration of the innovative pipeline is expected through complementary capabilities and product development synergies.

The combined company is likely to realize around $90 million of run-rate cost-related synergies, excluding one-time costs, by the end of the third year, on the back of operational efficiencies, supply chain optimization, and shared administrative functions.

Additionally, by optimizing Ortho’s enhanced global commercial reach and expansive product portfolio, Quidel expects cross-selling revenue synergies over $100 million by 2025 and significant adjusted EBITDA benefits.

Terms of the Deal

Per the terms, shareholders of Ortho will receive 0.1055 shares of the combined entity and $7.14 in cash for each share held. The transaction, which has been approved by the Boards of Directors of both companies, is likely to close in the first half of Fiscal 2022, pending regulatory and shareholder approvals.

Upon completion of the transaction, existing Ortho shareholders will own 38% of the combined entity. Notably, the Board of the combined entity will comprise eight directors designated by Quidel and four by Ortho, while Quidel CEO Douglas Bryant will be appointed Chairman and CEO.

Quidel CEO Comments

Douglas Bryant said, “The combination with Ortho will help solidify Quidel as a leader in the diagnostics industry, bringing together innovative, complementary products, solutions, and services that enhance the health and well-being of patients across the globe. Establishing a stronger leadership position, we expect the combined company will emerge as a global player with top-tier R&D capabilities, a more diverse product pipeline, and broader geographic footprint.”

“We look forward to joining together to continue the strong patient focus that is core to our mission, creating an organization with a shared goal of discovering, developing, and delivering innovative solutions to our customers,” Bryant added.

Wall Street’s Take

The stock has picked up a rating from one analyst in the past three months. Craig-Hallum analyst Alexander Nowak reiterated a Buy rating and a QDEL price target of $219 (59.4% upside potential).