Danaher’s diagnostic deal

Acquisition-hungry company offers to acquire Beckman Coulter for about $6.8 billion

Amy Swinderman
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WASHINGTON, D.C.—On Feb. 7, Danaher Corp. announced adefinitive merger agreement with Beckman Coulter Inc. that valued BeckmanCoulter at $83.50 per share, or about $6.8 billion.
The offer represented a premium of about 45 percent toBeckman Coulter's closing price on Dec. 9, when market speculation began abouta possible sale of the company.
Beckman Coulter's board of directors has unanimouslyrecommended that the company's shareholders accept the offer. When thetransaction is completed—an event expected to occur within the first half ofthis year pending regulatory and other customary approvals—Beckman Coulter willbe folded into Danaher's Life Sciences & Diagnostics segment along withsome of Danaher's other recent prizes: Leica, AB Sciex, Radiometer andMolecular Devices.
Neither company is saying much about the transaction beyondwhat they offered in a press release announcing the deal, in which DanaherPresident and CEO H. Lawrence Culp Jr. called Beckman Coulter "an iconiccompany with a great brand, broad reach and technology leadership; wellpositioned in the markets it serves."
"Beckman provides an excellent complement to our existingLife Sciences & Diagnostics businesses," Culp stated. "Being part ofDanaher, Beckman associates will have the opportunity to leverage the power ofthe Danaher business system, including the processes by which Danaheraccelerates growth through new product innovation and driving sales, marketingand service, as well as its strength in continuously expanding margins."
In a call to investors about the deal, Danaher heraldedBeckman Coulter's $3.7 billion in annual revenues and more than 200,000diagnostic systems in use around the world by both hospital and national referencelabs. Danaher cited Beckman Coulter's position as an avenue to this high-growthmarket, which is expected to blossom in the next few years due to increasedinvestment in preventive and personalized medicine, an aging population ingreater need of diagnostic testing and a heightened focus on this area inemerging markets.
Orange County, Calif.-based Beckman Coulter also has astrong geographic reach, Danaher said, with about half of its revenue comingfrom North America, and the other half evenly split between Europe and the restof the world.
Danaher said it expects to see about $250 million in costsynergies from the transaction.
Both companies declined to comment on the deal.
Despite rampant market rumors about a possible BeckmanCoulter sale, analysts are not expecting a higher bid to emerge, and shares inboth companies reflect that confidence.
 Beckman shares jumped 9.8 percent to $82.51 in morning trading, whileDanaher was up 3.2 percent at $49.51 after rising to $50.29, a lifetime highfor the Washington, D.C.-based company.
"Given prior speculation about the deal in the press … wethink 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 demandingapplications in the world. In addition to Medical Technologies (including LifeSciences & Diagnostics, as well as Dental divisions), its diverse systemsare spread among several strategic platforms: Professional Instrumentation(Environmental, Test & Measurement), Industrial Technologies (Motion,Product ID, Focused Niche Businesses) and Tools & Components (Mechanic'sHand Tools).
Investors have lauded Danaher's ability to integrate themany acquisitions the company makes each year. The Beckman Coulter deal is thecompany's largest to date. Its second-largest acquisition was Tektronix Inc.,announced in October 2007, for about $2.8 billion. In April 2006, Danaher paidabout $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 CapitalIndustrial Select Conference that was broadcast over the Internet, Culp saidthe company may curtail its M&A acquisition activity over the next six tonine months.
"I don't think that we are handcuffed," Culp said. "Theremay be a period of time here where we've got to be very crisp in ourprioritization. As we get back to perhaps full strength in 2012, we will againbe investing broadly across the corporation."
The company's deals are being compared to other largeindustrial companies' recent forays into the medical devices market, such as3M, Siemens, Philips and GE.

Danaher boasts 78 percent increase in Q4 profits
WASHINGTON, D.C.—Shortly before its offer for BeckmanCoulter Inc. was announced, Danaher Corp. reported that its fourth-quarterearnings rose 78 percent, topping the company's own estimates as well asanalyst expectations. Danaher attributed this increase to improved sales acrossits 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 theprevious year.
Excluding one-time items, adjusted earnings for the quarterwere 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 thequarter.
Total sales for the quarter increased 15 percent to $3.61billion from $3.13 billion in the same period last year. After adjusting foracquisitions and currency translation, core revenues increased 13 percent forthe quarter compared to the fourth quarter of 2009. Analysts estimated revenuesof $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 areclear leaders. The investments we have made in innovation and emerging marketsare driving growth and share gains," said Lawrence Culp, president and CEO ofDanaher, in the company's earnings release.

Amy Swinderman

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