Agilent to acquire Danish company Dako for $2.2 billion

Agilent characterizes the acquisition, an all-cash deal that is the largest in its history, as the ‘next step’ in the company’s growing role in clinical diagnostics, and it predicts the transaction will be immediately accretive to earnings

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SANTA CLARA, Calif.—Taking a rather large stride inits strategic goals for the clinical diagnostics market, Agilent TechnologiesInc. on May 17 announced the execution of a definitive agreement to acquireGlostrup, Denmark-based Dako, a cancer diagnostic company, for $2.2 billion ona debt-free basis.
Agilent maintains that Dako will strategicallycomplement Agilent's research technologies and will accelerate growth inrapidly expanding segments of diagnostic markets—and calls it the "next step inAgilent's growing role in clinical diagnostics." And a big step it is, with theall-cash transaction being the largest in Agilent's history.
"Agilent's strategy in acquiring Dako is aboutstrengthening the company's presence in life science and about revenue growth,"said Agilent President and CEO Bill Sullivan in a news release, characterizingDako as one of the world's leading providers of cancer diagnostics tools. "Dakoemploys extremely talented people with specialized expertise that we highlyvalue. Their knowledge and experience will be very important as we move forwardtogether. In the rapidly growing diagnostics market, Dako's products andcapabilities are a strategic complement to Agilent's existing offerings."
Sullivan predicts that together, the combinedcompanies will be able to develop a wider range of products to aid in the fightagainst cancer.
"Like Agilent, Dako has a long history as a leaderin scientific advancement and a culture that values discovery and innovation,said Lars Holmkvist, CEO of Dako, as he looked at complementary strengthspossessed by the two companies. "We believe that Agilent and Dako are a winningcombination."
"This deal appears to make sense as Dako isconsidered an attractive asset in tissue diagnostics, a market with robustunderlying fundamentals," wrote Doug Schenkel, an analyst at Cowen & Co.,shortly after the announcement of the deal, adding that Agilent has some $3.9billion in cash outside the United States and that money could be used for morelife-science and diagnostic deals in other countries to avoid U.S. taxes.
The acquisition is expected to close within thenext 60 days, subject to the satisfaction of customary closing conditions, andAgilent expects the acquisition to be immediately accretive to corporateearnings on a non-GAAP basis.
Dako provides antibodies, reagents, scientificinstruments and software primarily to customers in pathology laboratories "toraise the standards for fast and accurate diagnostic answers for cancerpatients," according to the companies. Dako also collaborates with a number ofmajor pharmaceutical companies to develop new potential pharmacodiagnostics, orcompanion diagnostics, which may be used to identify patients most likely tobenefit from a specific targeted therapy. Dako's products are sold in more than100 countries employing more than 1,000 people, and in 2010 its annual revenuewas approximately $340 million.
Looking forward, Agilent said in a conference callabout the acquisition that it expects Dako to generate sales $373 million infiscal year 2013 and noted that it will probably report Dako sales as aseparate segment. If Agilent's predictions of immediate gains from theacquisition hold true, it could be a good boost for the company, given that thelife-science part of Agilent was responsible for roughly one-third of thecompany's 2011 revenue of $5.58 billion.

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