Shares of Danaher Corp. (NYSE: DHR – $122.17) are climbing about 7.5% after it announced it has entered into a definitive agreement with General Electric Co. to acquire its Biopharma business for a cash price of about $21.4 billion. GE Biopharma is a leading provider of instruments, consumables and software that support the research, discovery, process development and manufacturing workflows of biopharmaceutical drugs. The business is expected to generate annual revenue of about $3.2 billion for Danaher in 2019, with approximately 75% of these revenues considered recurring. The new venture will be established as a stand-alone operating company within Danaher’s $6.5 billion Life Sciences segment, joining the company’s Pall, Beckman Coulter, SCIEX, Leica Microsystems, Molecular Devices, Phenomenex and IDT businesses. Management expects to finance the transaction with about $3 billion of proceeds from an equity offering (which may include an offering of mandatory convertible preferred shares), and the rest from available cash on hand and proceeds from the issuance of debt and/or new credit facilities.
The new business will be accretive to adjusted earnings per share by about $0.45 to $0.50 in the first full year following the acquisition, according to management. Additionally, Danaher said it was considering an initial public offering for its dental business, citing the size of this new purchase. Shares of DHR, which have rewarded investors since entering the conservative portfolio with a gain before dividends of 267%, can continue to be held.