Dive Brief:
- BTIG analysts expect NuVasive shareholders to “begrudgingly vote in favor” of Globus Medical’s $3.1 billion buyout bid despite being unhappy with the deal.
- After reviewing a financial filing about the takeover, the analysts noted that Globus was the only bidder for NuVasive and initially tried to buy the spine device business for $68.46 a share in Oct. 2021. NuVasive ultimately accepted an offer worth $57.72 in Feb. 2023.
- The fact that Globus initially made an offer above the final price led the analysts to question if it will go higher if NuVasive investors reject the current offer. However, in the absence of other offers, the analysts expect the deal to go through at the current price.
Dive Insight:
The CEOs of Globus and NuVasive met in Sept. 2021 to discuss a possible business combination, the filing said. Two weeks later, Globus made a non-binding all-stock offer that valued NuVasive at $68.46 a share. As NuVasive was assessing its next steps, media reports about a potential deal caused stock price volatility and disruption at the companies.
As the talks were at a very early stage and no diligence information had been shared, the companies felt that “engaging in more substantive interactions would lead to further unwanted disruption.” The discussions stopped until Globus again contacted NuVasive about a potential deal in Oct. 2022.
Over the year of inaction, NuVasive’s share price fell and Globus came back with a lower offer at the start of November, 2022. Globus again cut its offer later that month to reflect changes in the share prices of both firms, with a new valuing NuVasive at $50.69 per share. NuVasive paused talks “in light of the macro-economic environment and continued stock price volatility” but returned to the deal table days later.
The BTIG analysts said NuVasive’s rapid resumption of talks “reflects the weak negotiating position” that the company “truly was in.” If another company had discussed a deal with NuVasive, the financial filing would include anonymized details of the talks. Globus was the only bidder, a fact that has shaped BTIG’s attitude to the deal.
“In our view, [Globus’] acquisition of [NuVasive] was (and is) their best solution after years of tepid share returns,” the analysts wrote in a note to investors. “It was clear to us that none of the other major strategic players were in a position to bid on NuVasive — either because they were not interested or were financially tied up in other areas. Either way, there was not another offer coming.”
The analysts said the financial filing may help explain why Globus wants to buy NuVasive. Specifically, the filing reveals that Globus’ internal growth forecast, with a compoung annual growth rate of 8.2%, is below the consensus analyst estimate of 9.5%. The BTIG analysts speculate that if Globus’ growth were to disappoint, its share price premium “could have been put in jeopardy.”
NuVasive also shared financial forecasts in the filing. The internal forecasts provided to Globus are below the outlook NuVasive shared with investors last year. At its investor day, NuVasive said it expected $1.7 billion of core business revenue by 2027, or $2 billion including M&A, but in its due diligence with Globus, the company said it currently expects just $1.54 billion in revenue by that date.The BTIG analysts are “uncertain why [NuVasive] had internal projections that were below their public targets,” adding that they “would have thought that these would be higher to ensure that [NuVasive] can hit the targets it set out at its Analyst Day.”
