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Danaher to Spend $1.1B to Acquire MDS Analytical Division; Deal Includes Life Tech's MS Stake

NEW YORK (GenomeWeb News) – Danaher will spend $1.1 billion to acquire the Analytical Technologies division of MDS, including the mass spectrometry joint venture with Life Technologies.

Under the deal, MDS will receive $650 million in cash, while Life Technologies will get $450 million for its stake in the JV.

Danaher said that MDS Analytical Technologies and the AB Sciex mass spec business will add $650 million in annual revenues for the firm, of which around $525 million comes from the mass spec business. It intends to operate the businesses within its Danaher Medical Technologies segment, which includes its Leica, Radiometer, Sybron, and KaVo businesses. In total, Danaher expects to bring in revenues of more than $2 billion per year from its life sciences and diagnostics products.

MDS said that Danaher's acquisition includes around 1,100 employees in 10 countries.

"AB SCIEX is the market leader in mass spectrometry and its instruments address the needs of a broad scientific community involved in many applications including the research, applied and clinical markets," Danaher President and CEO H. Lawrence Culp said in a statement. "We are excited about the opportunity to acquire two leading brands in the life sciences instrumentation market, which will complement our existing Medical Technologies businesses and present an attractive value creation opportunity."

Following the merger last year of Applied Biosystems and Invitrogen to form Life Technologies, there was wide speculation in the industry about Life Technologies' plans for the mass spec joint venture, as it didn't appear to be a good fit with the rest of the merged company's focus. But at the time the nearly $7 billion deal was announced, Life Technologies Chairman and CEO Greg Lucier said, "We're going to run that business. We're going to run it for success with our partner, and it is business as usual."

However, during a conference call this morning, he acknowledged the mass spec joint venture was not a strategic fit for the firm.

"While a joint venture was once the right structure to combine corporate capabilities and launch this business, it is no longer the best approach to win in a more mature and competitive mass spec industry," said Lucier. "We believe one entity needs to control the entire value chain from R&D, to manufacturing and sales and service."

"I'm sure news of this divestiture is not surprising to many of our investors, given our focus on biological reagents, and the associated instruments that consume those reagents," said Lucier. "Mass spectrometry systems just don't have that consumable trail."

Life Technologies said that the divestiture is not expected to affect its previously announced fiscal-year 2009 expectations of $2.70 to $2.80 in non-GAAP earnings per share. In addition, the company reiterated its synergy targets for the Invitrogen and Applied Biosystems merger of $95 million in 2009 and $175 million by 2011.

The firm intends to apply proceeds of $290 million from the deal, after taxes and expenses, to the repayment of debt.

For MDS, the divestiture of its Analytical Technologies business is part of a broader strategic positioning, in which the company will focus entirely on its MDS Nordion business, which provides medical isotopes for molecular and diagnostic imaging. In addition to selling MDS Analytical Technologies, the firm also is looking for a buyer for its MDS Pharma Services division.

"The economic downturn and the prolonged shutdown of Atomic Energy of Canada Ltd.'s (AECL) National Research Universal (NRU) reactor have created significant challenges for our businesses that contributed to this course of action," MDS President and CEO Stephen DeFalco said in a statement.

MDS said that it plans to return around $400 million to $450 million of the proceeds from the sale to its shareholders by way of a share buyback. It expects to commence this action within 30 days following closure of the deal, which is expected in the fourth quarter of this year, pending shareholder and regulatory approvals.