As Danaher Corp. looks to take advantage of the growing purifiers market by acquiring water-filter maker Pall Corp. for $13.8 billion, another announcement was made by the company of a split-up coming up under which the company will be divided into two separate listed companies.
The Washington based Danaher Corporation (DHR, Financial) declared to buy the air and water-filter maker Pall Corp. (PLL, Financial) for a sum of $13.8 billion and further plans of the company dividing into two separate listed entities by 2016. Shares of both the companies went up 5% at $90 for Danaher and $124.61 for Pall Corp.
The deal and the division
Founded in 1969, the large American global active company Danaher Corp. deals in five segments: Test & Measurement, Dental, Industrial Technologies, Environmental and Life Science & Diagnostics. Pall Corp. on the other hand was founded in 1946 and is a global supplier of filtration, separations and purification products.
As per a market analyst, Danaher had been eyeing to buy Pall Corp. since "the last decade." The company has been noted as an aggressive acquirer, which has cracked a total of four deals since September last year after the appointment of Joyce Jr. as the chief executive. Joyce had also shared his intentions of taking over Switzerland-based Nobel Biocare (NOBN, Financial) to increase its stand in the dental implants market.
Danaher Corp with $60 billion market value offered $127.20 per share, which represented a premium of almost 28% to Pall Corp.’s close on the day before acquisition. The deal is said to be a perfect match between Pall’s core filtration business and Danaher’s life sciences and environmental franchises.
Going forward, the company will split into a science and technology company and an industrial company with the help of a tax-free separation. While one company would contain Pall Corp. and Danaher’s life sciences and diagnostics, dental, water quality and product identification businesses retaining the Danaher name, the other will be involved in the production of test and measurement products, retail fuel pumps, telematics and automation products. Before the division, the combined businesses of the company had posted revenue of $6 billion in the year 2014. For the company retaining the Danaher name, Joyce will continue as the CEO, while the other company will be led by James Lico who currently runs the company’s retail fuel and test and measurement businesses.
The deal between the two companies is said to close by the end of this year while the split will be completed by the end of 2016. Danaher will be using available cash and new debt to finance the deal. For Pall Corp, Goldman Sachs & Co. served as the financial advisor and the legal advisor was Shearman & Sterling LLP.
Market scenario
Amid the strong demand for advanced purification systems and launch of more biologics by the biotechnology companies as well as the drugs made from living cells, the already flourishing $20 billion filtration market is growing at a fast pace. As per market analyst Ross Muken, a jump from the existing 20%-25% market share to almost 50% is set to occur in the Biologic drugs market share in the coming years thereby leading to an increased demand in production and more demand for filtration products and services.
In the recent past, many diversified industrial companies including names such as Tyco International Plc.Ă‚ (TYC, Financial), ITT Corp. (ITT, Financial), Illinois Tool Works Inc. (ITW, Financial), Johnson Controls Inc. (JCI, Financial) and Ingersoll-Rand PLC. (IR, Financial) had to either sell or spin off their businesses to shareholders owing to diminishing profits and pressure from investors. Danaher on the other hand has been quite consistent in its performance year over year and has been known for its strong focus on driving out costs and increasing margins. The company is famous for its approach towards difficult times and leveraging very well from its acquisitions.
Future outlook-
The deal made by Danaher has been recorded as its largest after the takeover of Beckman Coulter in 2011 for $5.9 billion. The decision to divide the company has been noted by its owners as a measure to increase the acquisition power for future as the existent company has run out of investment that can be used to make more mergers. Also, the division of the businesses will make the focus and goal more clear for both the companies after division with renewed license to do further takeovers and tie-ins.
