The story has been updated to include information and comments from a conference call Danaher held this morning.
NEW YORK (GenomeWeb News) – Danaher has agreed to buy Beckman Coulter in a deal valued at $6.8 billion, the two companies announced today.
Danaher will acquire all outstanding shares of Beckman Coulter stock at $83.50 per share, a 45 percent premium to the closing price of Beckman Coulter's stock on Dec. 9, prior to speculation about the firm being put up for sale.
The $6.8 billion price tag includes debt assumed and net of cash acquired. The deal is expected to be completed in the first half of 2011.
During a conference call, Larry Culp, president and CEO of Danaher, said the deal is expected to generate a 10 percent return on invested capital in less than four years. Within that time frame, Beckman Coulter is also expected to contribute more than $650 million to Danaher's free cash flow.
On an adjusted basis, the deal is anticipated to add $0.05 to $0.10 to Danaher's EPS in 2011. And in 2012, the deal is anticipated to add $0.25 to $0.30 to the company's EPS on a GAAP basis, Culp said.
Culp said that the company has identified more than $250 million in cost synergies that can be realized over the "next few years … including significant sourcing and procurement synergies."
He also noted Beckman Coulter's strong presence in China, where it has the number two position in the in vitro diagnostics space with more than $300 million in revenues, growing at 25 percent annually.
"We're excited about the potential opportunity to realize additional market share gains in that region by taking advantage of our existing footprint with Leica and Radiometer and the relationships we have with hospitals and labs," Culp said.
Upon completion, Beckman Coulter would become part of Danaher's Life Sciences and Diagnostics segment, joining the AB Sciex, Leica, Radiometer, and Molecular Devices businesses. It provides Danaher with one of the world's largest diagnostics players; Beckman Coulter's clinical diagnostics business had fiscal-year 2009 sales of $2.79 billion.
Beckman Coulter's board has approved the deal unanimously, its President and CEO, Bob Hurley, said in a statement. The deal, he added, would allow the company to leverage its global commercial infrastructure and installed base to increase opportunities in mature and emerging markets.
"Longer term, we will have significant opportunities to leverage our relationships across our large installed base of automated systems in hospital laboratories with that of Danaher," Hurley said.
The proposed sale of Beckman Coulter comes amidst a challenging year for the firm, marked by unreliable results from its Accutnl troponin test kits run on the UniCel Dxl immunoassay system, and an eventual recall of the test.
The company also lowered its full-year 2010 revenue and earnings expectations during the summer, and in September, Scott Garrett resigned as president, CEO, and chairman of the firm.
Last month, the Brea, Calif.-base firm said that it expects to file with the US Food and Drug Administration in May or June for clearance of the test on its Access and DxI instruments.
Responding to a question about whether Danaher expects the test to be on the market by the end of the year, Culp said that Danaher has done "a tremendous amount of work from a diligence perspective" in reviewing the test and allowed itself "a little bit of wiggle room."
Beckman Coulter also came under fire from the FDA, which believed it marketed the test without proper agency approval. Culp said the topic was "a key focal point for us from Day 1 and was something we spent time on literally every day during two months of diligence."
Without elaborating, he added that remedies are under way, and "there is a seriousness [within Beckman Coulter] of effort here that I think is smack right in the right direction. I think clearly we're going to bring that intensity and that focus, as well."
"[M]ake no mistake, we have work to do … but we concluded that it's work we can do, it's work we will do, and frankly that's part of the value-creation opportunity here, to get in at this point at this time, at this price, and do this work to make sure this business is second to none on these sorts of issues," Culp said.
For Danaher, the purchase is part of its continued expansion into the life sciences tools space. A year ago, it completed its purchases of AB Sciex and Molecular Devices.
Since rumors first began that Beckman Coulter was on the market for a buyer, speculation mainly focused on a number of private equity firms as being potential buyers. Last week, two groups — one consisting of the Blackstone Group and TPG Capital, the other of Apollo Global Management and the Carlyle Group — reportedly made second-round takeover bids for Beckman Coulter.
During all the talk of a possible acquisition, Danaher was the only company that was consistently identified as a serious bidder for Beckman Coulter. At the JP Morgan Healthcare Conference last month, CEO Larry Culp, while not commenting specifically about Beckman Coulter, said that Danaher had been talking to a number of companies in the molecular diagnostics space "to avail ourselves to them."
Though Beckman Coulter does not yet have a molecular diagnostics instrument platform on the market, the firm has been developing such a system, the UniCel DxN, over the past few years. The firm had previously said that it expects to launch the system in 2011.
Beckman Coulter has not yet released its earnings for the fourth quarter or full-year 2010, but during today's call Culp said that the company generated about $3.7 billion in revenues. In 2009, it posted revenues of $3.26 billion.
Danaher recently reported $13.2 billion in revenues for 2010, including $2.3 billion in its Life Sciences & Diagnostics division.
In early afternoon trading Monday on the NYSE, shares of Beckman Coulter rose 10 percent to $82.49. Danaher, which also trades on the NYSE, was up 3 percent at $49.38.