By JON KAMP And LAUREN POLLOCK
Source: Wall Street Journal
Danaher Corp. agreed to acquire medical-test maker Beckman Coulter Inc. for $5.87 billion as the diversified manufacturer looks to gain a stronger foothold in the growing diagnostics industry.
The deal ends two months of speculation about the future of Beckman, which endured a rough year in 2010 following the recall of a faulty test for heart problems, multiple financial-guidance cuts and an unexpected CEO resignation.
The Wall Street Journal reported in December that Beckman had put itself on the block and could fetch more than $5 billion in a sale. Analysts had speculated the company would attract a large number of suitors. Under the terms of the deal, Danaher will pay $83.50 for each Beckman share, which the companies said represents a premium of about 45% over where the stock was trading Dec. 9, before takeover rumors surfaced.
Beckman shares rose 9.7% to $82.48 early Monday, while Danaher was up 3.9% to $49.83. Beckman shares have never traded as high as the offer price and were under $44 as recently as September. The stock is up 36% in the past three months, thanks to the acquisition speculation.
Danaher said it is covering 25% of the deal with cash on hand, 60% from new and assumed debt and 15% from equity. The company plans to pay down a "sizable" amount of debt this year, Chief Financial Officer Daniel L. Comas said on a conference call.
Danaher expects the deal to add five cents to 10 cents to adjusted per-share earnings this year, excluding acquisition-related, one-time charges. The company then sees a per-share earnings benefit of 25 cents to 30 cents next year on a generally accepted accounting principles basis.
Additionally, Danaher sees an opportunity for more than $250 million in cost synergies over the next few years, Danaher Chief Executive H. Lawrence Culp Jr., said. The company anticipates a 10% return on invested capital in less than four years.
Mr. Culp said Beckman's heart-test issue "was a key focus" and that fixes are under way. He agreed with an analyst who suggested the heart test could get back on the market by year end, although he said Danaher has "allowed ourselves a little bit of wiggle room."
"Make no mistake, we have work to do," Mr. Culp said on the call. "Frankly, that is part of the value-creation opportunity here."Beckman was thrown into turmoil when it recalled the test for measuring a protein that signals heart problems, citing faulty results. The Orange County, Calif., company also came under fire from the Food and Drug Administration, which believed Beckman marketed that diagnostic test without the needed agency clearance. Beckman has been working on a clinical trial to support two upcoming FDA applications to back that test.
Meantime, former Chief Executive Scott Garrett abruptly resigned last September, and Beckman has said it was engaged in a search for his successor. Bob Hurley, who has served as chairman of Beckman's Japan operations, was named interim president and CEO.
"Following a very comprehensive and competitive process, the board of directors voted unanimously to accept Danaher's proposal," Mr. Hurley said in a press release.
Danaher has relied on acquisitions to bolster a slow-growing revenue base. The company looks for underperforming companies and has a reputation for wringing out fast margin-expansion results after deals.
Mr. Culp said Danaher doesn't believe additional large deals are needed to give it a strong life-sciences and diagnostics business, although future smaller-scale, "bolt-on" deals are possible.
The deal, structured as a tender offer, is expected to be completed in the first half of 2011. The companies valued it at about $6.8 billion, including debt assumption and net of cash acquired.
Late last month, Danaher reported its fourth-quarter earnings rose 78%, topping the company's own estimates, as sales improved, margins surged and the company saw increased restructuring costs in the prior quarter.
Meanwhile, Beckman in October said its third-quarter earnings surged, following charges the prior year, while the company showed signs of improvement as it worked through quality problems and pressure from the weakened economy.
