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Danaher to Buy BioPharma, Offers Common & Preferred Shares

Zacks Equity Research

Danaher Corporation DHR has announced that it agreed to acquire General Electric Company’s GE BioPharma business. Concurrently, the company announced to have commenced offerings of preferred stocks and common shares.

Notably, shares of this conglomerate have increased 8.52% yesterday, ending the trading session at $123.15.

We discussed both the events in detail below:

Acquisition of BioPharma Business

The BioPharma business is part of General Electric’s GE Life Sciences business, which in turn is part of the company’s Healthcare segment. The BioPharma business comprises single-use technologies, process chromatography hardware and related consumables, development instrumentation and related consumables, cell culture media, and service. This business generated revenues of $3 billion in 2018. It is predicted to generate sales of $3.2 billion in 2019.

The BioPharma business will be integrated with Danaher’s Life Sciences segment and will complement the company’s biologics workflow solutions. The buyout is anticipated to boost non-GAAP adjusted earnings by 45-50 cents per share in the first year of the completion of the deal.

As noted, the buyout of General Electric’s BioPharma business has been valued at $21.4 billion. Of the total amount, Danaher will pay roughly $21 billion in cash and assume certain pension liabilities of General Electric. The cash portion will likely be paid through cash on hand, funds raised through debts and credit facilities, and proceeds from shares and preferred stock issuances.

Subject to receipt of regulatory approvals and fulfillment of customary closing conditions, the divestment is anticipated to be completed in the fourth quarter of 2019.

Common and Preferred Share Offerings

In addition to the BioPharma-acquisition deal, Danaher has announced yesterday to have commenced offerings of common shares worth $1.35 billion and Series A mandatory convertible preferred stocks worth $1.35 billion.

The company intends to use proceeds from these issuances to fund the acquisition of the BioPharma business.

Danaher’s Acquisition Moves

We believe that the above-mentioned transaction is consistent with Danaher’s policy of acquiring businesses to gain access to new customers, regions and product lines. In 2018, the company used roughly $2 billion for acquiring shares.

Danaher acquired Integrated DNA Technologies in April 2018, Blue Software in July 2018 and Labcyte Corporation in January 2019.

Zacks Rank and Stocks to Consider

With a market capitalization of approximately $79.5 billion, Danaher currently carries a Zacks Rank #3 (Hold). In the past 30 days, the Zacks Consensus Estimate for earnings remained unchanged at $4.78 for 2019.

This company’s share price has increased 9.2% in the past three months compared with 9.9% growth recorded by the industry.

Two better-ranked stocks in the industry are Carlisle Companies Incorporated CSL and United Technologies Corporation UTX. While Carlisle Companies currently sports a Zacks Rank #1 (Strong Buy), United Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for 2019 have improved for Carlisle Companies and United Technologies. Further, the earnings surprise in the last reported quarter was positive 30.58% for Carlisle Companies and 29.14% for United Technologies.

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