Globus Medical downgraded to Underperform from Buy at BofA

BofA analyst Craig Bijou downgraded Globus Medical (GMED) to Underperform from Buy with a price target of $63, down from $83, after the company announced an agreement to acquire NuVasive (NUVA) in an all-stock transaction that values the latter at a $3.1B enterprise value at current prices. The deal "came as a surprise to us despite prior rumors," BofA stated, adding that it sees real risk to sales estimates due to likely dis-synergies. Though the multiple that the price represents "seems reasonable given historical valuation," BofA struggles with Globus’ decision to dilute both revenue growth and margins for scale when the company has been consistently taking share year after year and does not appear to have been limited by its scale in terms of its ability to strike deals with hospitals.