Investing.com -- Bank of America said Owens&Minor’s decision to terminate its planned acquisition of Rotech Healthcare was unexpected but may ultimately prove beneficial, allowing the company to refocus on its core operations and potential asset sales.
The companies mutually agreed to cancel the deal after determining that regulatory clearance was unlikely. Owens&Minor (NYSE:OMI) cited antitrust concerns raised by the U.S. Federal Trade Commission in certain regional markets.
The transaction was previously expected to close in the first half of 2025.
OMI will incur about $100 million in costs related to the termination, including an $80 million payment to Rotech. It also plans to redeem $1 billion in notes issued in April and cancel associated loan commitments intended to fund the acquisition.
“This news is surprising to us given the competitive landscape in the durable medical equipment space,” BofA analysts wrote, noting they did not view the merger as anti-competitive. However, they said the move could benefit Owens&Minor by eliminating a complex integration and allowing management to focus on operations and cost control.
Rotech had been expected to add 15 cents to earnings per share by the second year, but BofA noted the deal was highly dependent on synergies and Rotech’s recent growth was weak, with revenue down 4% year-over-year in 2024.
BofA reiterated its “Underperform” rating on the stock but raised its price objective to $7.50 from $7.00, citing increased clarity on strategy and a lower debt burden.
The firm expects Owens&Minor to continue pursuing smaller acquisitions in its Patient Direct business and to push ahead with a potential sale of its Products and Healthcare Services (NASDAQ:HCSG) unit.
