Corning Acquires A Majority Stake In Becton Dickinson’s Lab Unit

Corning (NYSE:GLW) recently announced its plans to purchase Becton, Dickinson & Co’s Discovery Labware unit for $730 million. This acquisition will, in the initial phase, expand its Corning Life Sciences adding around 40% of additional revenue while providing it with a well established dealer network. It is a critical step by Corning in its efforts to build Corning Life Sciences’ into a billion dollar business by 2014. This will also contribute to the company’s overall objective of achieving $10 billion in revenue in the next few years. The Discovery Labware unit is focused on cellular analysis applications and products that contribute in the growth of living cells and tissues. The deal excludes Discovery’s advanced bio processing platform, and the acquisition will close later this year and will be partly funded by Corning’s cash.

We have a $16.50 price estimate for Corning, which is around 20% ahead of the market price.

See our full analysis of the Corning stock here

Expansion of Portfolio

The extensive product portfolio of Discovery Labware will help Corning Life Sciences in significantly augmenting its own offerings. Corning will integrate four Discovery Labware unit’s main product platforms — plastic consumable labware, including tubes, Petri dishes, and tissue culture dishes; liquid-handling products; cell-based assays and cell cultureware; and ADME (Absorption, Disposition, Metabolism, and Excretion) research in its own business. These products will start contributing revenues to the tune of $235 million starting this year. ^[1]

Diversification of Sales

This acquisition will help Corning Life Sciences to diversify its dealer network both domestically and internationally. Traditionally, Corning’s sales in this segment has been concentrated among two major distributors which account for over 30% of the sales. Discovery Labware has operations in North Carolina and UK, along with extensive dealer networks in Asia, Europe and North America. This improved dealer network should also help drive growth in the sales of Corning’s Life Sciences.

Corning’s Life Sciences is one of the more important divisions of Corning accounting for almost 10% of the stock’s value. In building our estimates, we expected Corning to make future acquisitions in this segment, and we forecast Corning’s revenues from this division to hit $4 billion by the end of our forecast period.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Corning Buys Discovery Labware for $730 million, Boston Herald, 12 Apr-2012 [↩]