Boston Scientific Corp. (NYSE: BSX) announced that it entered into a definitive agreement with Endo International PLC (NASDAQ: ENDP) to acquire its American Medical Systems urology portfolio. The deal calls for $1.6 billion in up-front cash and with the potential for an additional $50 million milestone based on 2016 sales. The deal is expected to close in the third quarter of 2015.

After the announcement of the deal Monday, Merrill Lynch weighed in and gave its outlook on the merger and what to look forward to. Ultimately, the firm views the deal as accretive to both earnings and returns while better positioning Boston Scientific’s urology division.

Some background on the acquisition from Boston Scientific’s press release:

Upon completion of the transaction, the AMS Men’s Health and Prostate Health businesses will become part of Boston Scientific Urology and Women’s Health. The acquisition encompasses the AMS product portfolio for treating urologic conditions, including benign prostatic hyperplasia (BPH), male stress urinary incontinence and erectile dysfunction. These technologies complement Boston Scientific’s strong kidney stone, pelvic organ prolapse, female stress urinary incontinence and abnormal uterine bleeding treatment portfolios, and together, will provide customers with a comprehensive urology, urogynecology and gynecologic surgery portfolio. The AMS women’s health business for treating pelvic organ prolapse and female stress urinary incontinence is not included in the transaction.

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Merrill Lynch raised its pro forma 2016 earnings per share (EPS) estimate to $1.10 from $1.05. This is based on the view that this acquisition will add $0.06 to 2016 EPS, but the suspension of share repurchases will have a -$0.01 impact. The price objective was raised to $19, which is a multiple of 17.2 times its 2016 EPS estimate.

The brokerage firm noted that it had increased confidence in Boston Scientific’s pipeline, and it believes the company can grow revenue in the range of 4% to 5% going forward.

One key point Merrill Lynch brought up was:

Our confidence in the top line and our ongoing margin diligence also suggests the BSX operating margin story is real (as has been well documented BSX’s margins are 500-1000 basis points below peers), which suggests BSX can be a solid 11-14% EPS grower for the next several years. We think a positive risk reward exists as the margin story plays out.

Shares of Boston Scientific were down 1.5% to $16.81 approaching the noon hour Tuesday. The stock has a consensus analyst price target of $17.52 and a 52-week trading range of $11.10 to $17.26.

Endo International shares were down 1.5% at $86.01. The consensus price target is $85.29, and the 52-week trading range is $53.62 to $89.88.

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