Danaher Buys Cepheid for $4 Billion in First Deal Since Spinoff

  • Offer at $53 a share gives Cepheid investors 54% premium
  • Cepheid diagnostics tools test for infectious diseases

Danaher Corp. made its first big deal since spinning off its industrial businesses in July to focus on science and technology, with the acquisition of medical diagnostics company Cepheid for $4 billion, including debt.

The offer, at $53 a share, is 54 percent higher than Cepheid’s closing price on Friday, the last day of trading since the U.S. Labor Day holiday. With the deal, Danaher Chief Executive Officer Thomas Joyce is gaining a maker of instruments that enable fast genetic testing for infectious diseases. The tools are crucial in containing the spread of highly problematic hospital-acquired bugs like MRSA and C. difficile, said Ross Muken, an analyst at Evercore ISI.

Cepheid is a “growth-centric acquisition” that is “cementing Tom’s bias as a technology forward CEO,” Muken, who advises buying Danaher’s stock, said in a note to investors.

Danaher was quick to get back to dealmaking after completing the separation of its older businesses into a separate company. With a sharper focus, the company is now hoping to pursue the acquisition strategy that -- at an average of 10 acquisitions a year in the past decade -- expanded its presence in the health-care and life-sciences industries.

Danaher, based in Washington, said in a statement Tuesday that it expects the acquisition to erode net earnings per share in the first full year after closing. Cepheid, which has posted four straight annual net losses since 2011, is predicted to return to profitability in 2017, according to analysts’ estimates compiled by Bloomberg. Revenue reached $539 million last year, and Cepheid has forecast as much as $635 million for this year.

Danaher’s shares declined 1.6 percent to $79.86 at 10:31 a.m. in New York. Cepheid rose 52 percent to $52.23.

While the deal offers a premium from Cepheid’s Friday close, it is below the stock’s all-time high of $63.52 in July 2015. Like many other biotechnology stocks, Sunnyvale, California-based Cepheid has dropped sharply in the past year.

Cepheid’s focus on small and midsize hospitals is a “unique opportunity” to complement Danaher’s own diagnostics unit, CEO Joyce told investors on a conference call Tuesday. “We intend to leverage that, and that’s a real benefit that Cepheid brings to our business today.”

After this purchase, Danaher plans to look for small or medium-size acquisitions, the CEO said.

The transaction is likely to be completed around the end of 2016, according to the statement. Danaher expects to fund the deal with cash and proceeds from the sale of debt.

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