Analyst Michael Ryskin from Bank of America Securities maintained a Hold rating on Waters and keeping the price target at $375.00.
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Michael Ryskin has given his Hold rating due to a combination of factors surrounding the recent merger announcement between Waters (WAT) and Becton, Dickinson and Company’s Biosciences & Diagnostic Solutions business. The transaction, valued at approximately $17.5 billion, is structured as a tax-efficient Reverse Morris Trust (RMT) and is expected to significantly increase Waters’ revenue and EBITDA by 2025. However, the deal’s valuation at 18.9x EV/EBITDA raises concerns about the strength of the assets involved and the strategic fit of the merger.
Despite the potential for high levels of cost and revenue synergies, including $200 million in cost synergies by year three and $290 million in revenue synergies by year five, the market’s reception to the deal is expected to be mixed. The anticipated synergies are notable, especially given the limited product and market overlap. Additionally, Waters had previously downplayed the likelihood of such a large transaction, which adds an element of uncertainty to the strategic direction. Therefore, while the merger could offer substantial growth, the uncertainties and valuation concerns justify a Hold rating at this time.