Medical equipment and diagnostics firm Danaher Corp. (NYSE: DHR) announced Monday morning that it has agreed to pay $21.4 billion in cash for the biopharma business of the Life Sciences’ division of General Electric Co. (NYSE: GE). The price represents a 17×-multiple to GE Biopharma’s expected 2019 EBITDA.
In 2018, GE’s Healthcare segment generated $19.78 billion in revenues, a year-over-year increase of 4%. For 2019, Danaher reckons the biopharma business will generate $3.2 billion in annual revenues, a year-over-year increase of about 6.7%. GE Biopharma will operate as a stand-alone company within Danaher’s Life Sciences segment. Other companies in that segment are Pall, Beckman Coulter Life Sciences, SCIEX, Leica Microsystems, Molecular Devices, Phenomenex and IDT.
Danaher CEO Thomas P. Joyce said:
Pall, Beckman Coulter Life Sciences, SCIEX, Leica Microsystems, Molecular Devices, Phenomenex, and IDT businesses. We expect GE Biopharma to advance our growth and innovation strategy in an important and highly attractive life science market. We see meaningful opportunities to harness the power of the Danaher Business System to further provide GE Biopharma’s customers with end-to-end bioprocessing solutions that help enable breakthrough development and production capabilities.
The transaction will be financed by a $3 billion equity offering (which may include an offering of mandatory convertible preferred shares), with the remainder financed from available cash and proceeds from the issuance of debt or new credit facilities.
Danaher estimates the acquisition will reduce GAAP diluted net earnings per share (EPS) by approximately $1.15 to $1.20 but will be accretive to adjusted diluted net EPS by about $0.45 to $0.50 in the first full year following completion of the acquisition. The company expects the acquisition to be completed by the fourth quarter of this year.
GE CEO H. Lawrence Culp commented:
Today’s transaction is a pivotal milestone. It demonstrates that we are executing on our strategy by taking thoughtful and deliberate action to reduce leverage and strengthen our balance sheet. We are retaining full flexibility for growth and strategic optionality with one of the world’s leading healthcare companies…. A more focused portfolio is the right structure for GE, and we have many options for maximizing shareholder value along the way.
Early Monday, GE stock traded up more than 13%, at $11.54 in a 52-week range of $6.66 to $15.59. The current 12-month price target on the stock is $11.91.
Danaher shares traded up more than 7% to $122.26. The 52-week range is $94.59 to $113.63, with that high posted on Friday. The stock’s 12-month price target was $115.29 before this morning’s announcement.