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Globus Medical fell 3.4% on Friday after plunging 18% on Thursday after the announcement of an all-stock acquisition of NuVasive, prompting a slew of Wall Street downgrades. NuVasive dropped 3.8%.
Globus (NYSE:GMED) was downgraded to hold at Needham, Loop, Piper Sandler, Truist, Wells Fargo, Canaccord and BTIG over the past two days.
Several of analysts mentioned different company cultures, as well as potentially tough times integrating the companies and the fact that historically spine deals haven’t performed well.
“Spine mergers historically have tended to be messy and often involve more disruption than parties originally anticipate,” Truist analyst Richard Newitter wrote in a note on Thursday. “It’s possible `this time will be different,’ but we are not ready to make that call …”
Truist’s Newitter cut his price target on Globus (GMED) to $70 from $85 in his downgrade to hold.
“We don’t expect investors to give GMED credit for a potentially successful deal until it demonstrates consistent execution for 2-4 quarters post-close,” Needham analyst David Saxon wrote in his downgrade. “Given this, we don’t expect GMED to see multiple expansion over the next 12-18 months and downgrade our rating to Hold.”
The downgrades come after Bloomberg first reported in November 2021 about a possible NuVasive-Globus combination, which also received skepticism from Wall Street analysts at the time.
Truist’s Newitter on Thursday also said NuVasive (NUVA) could see another bidder come in “over the top” as the valuation in the Globus (GMED) deal wasn’t that spectacular. He mentioned private equity may be interested.
