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Danaherís diagnostic deal
March 2011
by Amy Swinderman  |  Email the author


WASHINGTON, D.C.óOn Feb. 7, Danaher Corp. announced a definitive merger agreement with Beckman Coulter Inc. that valued Beckman Coulter at $83.50 per share, or about $6.8 billion.
The offer represented a premium of about 45 percent to Beckman Coulter's closing price on Dec. 9, when market speculation began about a possible sale of the company. Beckman Coulter's board of directors has unanimously recommended that the company's shareholders accept the offer. When the transaction is completedóan event expected to occur within the first half of this year pending regulatory and other customary approvalsóBeckman Coulter will be folded into Danaher's Life Sciences & Diagnostics segment along with some of Danaher's other recent prizes: Leica, AB Sciex, Radiometer and Molecular Devices.
Neither company is saying much about the transaction beyond what they offered in a press release announcing the deal, in which Danaher President and CEO H. Lawrence Culp Jr. called Beckman Coulter "an iconic company with a great brand, broad reach and technology leadership; well positioned in the markets it serves."
"Beckman provides an excellent complement to our existing Life Sciences & Diagnostics businesses," Culp stated. "Being part of Danaher, Beckman associates will have the opportunity to leverage the power of the Danaher business system, including the processes by which Danaher accelerates growth through new product innovation and driving sales, marketing and service, as well as its strength in continuously expanding margins."
In a call to investors about the deal, Danaher heralded Beckman Coulter's $3.7 billion in annual revenues and more than 200,000 diagnostic systems in use around the world by both hospital and national reference labs. Danaher cited Beckman Coulter's position as an avenue to this high-growth market, which is expected to blossom in the next few years due to increased investment in preventive and personalized medicine, an aging population in greater need of diagnostic testing and a heightened focus on this area in emerging markets.
Orange County, Calif.-based Beckman Coulter also has a strong geographic reach, Danaher said, with about half of its revenue coming from North America, and the other half evenly split between Europe and the rest of the world.  
Danaher said it expects to see about $250 million in cost synergies from the transaction. Both companies declined to comment on the deal.  
Despite rampant market rumors about a possible Beckman Coulter sale, analysts are not expecting a higher bid to emerge, and shares in both companies reflect that confidence.
 Beckman shares jumped 9.8 percent to $82.51 in morning trading, while Danaher was up 3.2 percent at $49.51 after rising to $50.29, a lifetime high for the Washington, D.C.-based company.
"Given prior speculation about the deal in the press Ö we think another party coming in over the top at this point is highly unlikely. Valuation looks fair based on prior transactions," said J.P. Morgan.  
Danaher's products span some of the most demanding applications in the world. In addition to Medical Technologies (including Life Sciences & Diagnostics, as well as Dental divisions), its diverse systems are spread among several strategic platforms: Professional Instrumentation (Environmental, Test & Measurement), Industrial Technologies (Motion, Product ID, Focused Niche Businesses) and Tools & Components (Mechanic's Hand Tools).
Investors have lauded Danaher's ability to integrate the many acquisitions the company makes each year. The Beckman Coulter deal is the company's largest to date. Its second-largest acquisition was Tektronix Inc., announced in October 2007, for about $2.8 billion. In April 2006, Danaher paid about $2 billion for Sybron Dental Specialties Inc.
Danaher told investors in December that it could spend about $4 billion on acquisitions by mid-2012, but in a recent Barclays Capital Industrial Select Conference that was broadcast over the Internet, Culp said the company may curtail its M&A acquisition activity over the next six to nine months.  
"I don't think that we are handcuffed," Culp said. "There may be a period of time here where we've got to be very crisp in our prioritization. As we get back to perhaps full strength in 2012, we will again be investing broadly across the corporation."
The company's deals are being compared to other large industrial companies' recent forays into the medical devices market, such as 3M, Siemens, Philips and GE.

Danaher boasts 78 percent increase in Q4 profits  
WASHINGTON, D.C.óShortly before its offer for Beckman Coulter Inc. was announced, Danaher Corp. reported that its fourth-quarter earnings rose 78 percent, topping the company's own estimates as well as analyst expectations. Danaher attributed this increase to improved sales across its various business segments and restructuring costs.
Danaher 's net earnings for Q4 increased to $473.86 million, or 69 cents per share, from $266.93 million, or 40 cents per share, in the previous year.   Excluding one-time items, adjusted earnings for the quarter were 67 cents per share, up from 56 cents per share a year ago. On average, analysts expected the company to report earnings of 66 cents per share for the quarter.
Total sales for the quarter increased 15 percent to $3.61 billion from $3.13 billion in the same period last year. After adjusting for acquisitions and currency translation, core revenues increased 13 percent for the quarter compared to the fourth quarter of 2009. Analysts estimated revenues of $3.49 billion for the quarter.
"We continued to evolve the portfolio toward higher growth, higher technology, more global businesses serving markets where our brands are clear leaders. The investments we have made in innovation and emerging markets are driving growth and share gains," said Lawrence Culp, president and CEO of Danaher, in the company's earnings release.
Code: E031102



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