This week, Danaher announced a definitive agreement to purchase General Electric's Biopharma business for a cash purchase price of $21.4 billion.
Factoring tax benefits from the structure of the deal, the net purchase price is about $20 billion, Danaher said.
Reuters report this as the biggest strategy reversal since Lawrence Culp took over as the industrial conglomerate's chief executive in September:
"GE rejected an approach by Danaher for that business a year ago. But its stance changed after Culp was appointed CEO and GE board’s became more open to a deal, according to people familiar with the negotiations who requested anonymity to discuss them."
GE Biopharma provides instruments, consumables, and software for the research, discovery, process development, and manufacturing workflows of biopharmaceutical drugs. The business comprises process chromatography hardware and consumables, cell culture media, single-use technologies, development instrumentation and consumables, and service. The business is expected to generate $3.2 billion in revenues in 2019 with about 75 percent of that considered recurring revenues.
The business will be a standalone company operating within Danaher's $6.5 billion Life Sciences segment.
Danaher is financing the deal with $3 billion from an equity offering, cash on hand, and proceeds from an issuance of debt and/or new credit facilities, it said. GAAP EPS is expected to be reduced by about $1.15 to $1.20 in the first full year after the acquisition, which is expected to close in the fourth quarter of 2019. On a non-GAAP basis, the acquisition is anticipated to be accretive by about $.45 to $.50 per share.
"This acquisition will bring a talented and passionate team as well as a highly innovative, industry-leading product suite to our Life Sciences portfolio, providing an excellent complement to our current biologics workflow solutions," Danaher President and CEO Thomas Joyce said in a statement. "We expect GE Biopharma to advance our growth and innovation strategy in an important and highly attractive life science market."
In a research note, UBS analyst Dan Brennan called the deal "highly strategic," and said that GE is a leader in downstream chromatography that is complementary to Danaher business Pall's upstream filtration operations. "With the combined GE and Pall offerings, we see room for revenue synergies (in addition to announced cost synergies)," he said.
Evercore ISI analyst Ross Muken compared the pending deal to Thermo Fisher Scientific's acquisition of Life Technologies in 2014: "This is likely to be a multiyear home run," he said in a research note. "They acquire into tremendous assets, uniquely leveraged to bipharma manufacturing, with a market-leading footprint notably in downstream. The business likely grows 6-7 percent and this could prove conservative once matched up with [Pall]."
In morning trading on the New York Stock Exchange, Danaher's shares were up more than 7 percent at $121.82.
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