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Danaher Restructure Debt With Senior Notes Issue & Redemption

Zacks Equity Research
·5 min read

Danaher Corporation DHR yesterday announced the completion of its $1 billion worth of senior notes offering. Concurrently, the conglomerate communicated its plans to redeem its previously floated Euro-denominated senior notes maturing in 2022.

It is worth mentioning here that the company’s shares have lost 0.1% yesterday, ending the trading session at $218.24.

Inside the Headlines

As mentioned previously, the notes offered carries a coupon rate of 2.600% and will mature on Oct 1, 2050. Interest on these notes will be paid semi-annually, each on Apr 1 and Oct 1. The first interest payment is due on Apr 1, 2021.

It is worth mentioning here that the issuer has the option to redeem the 2.600% senior notes before Apr 1, 2050, at a redemption price, which is greater than the principal value of the notes, and the present value of the pending payments as well as any accrued and unpaid interests, if applicable. The notes can be redeemed on or after Apr 1, 2050, for a value equal to par value plus accrued and unpaid interest.

The notes were offered to the public at 98.970% of the principal amount and generated net proceeds (after deduction of underwriting discounts and issuance-related costs) of $980.1 million for Danaher. The proceeds will be used for satisfying general corporate purposes, including funding for working capital and capital expenditure needs, the redemption of Euro-denominated senior notes maturing in 2022, refinancing of other indebtedness (outstanding), and other purposes.

The above-mentioned redemption is applicable for €800 million worth of senior notes maturing in 2022. The notes — guaranteed by Danaher — were previously issued by DH Europe Finance S.À R.L.

Danaher expects to redeem the Euro-denominated senior notes on Nov 5, 2020. The redemption value will be higher of the principal amount of the to-be-redeemed notes and the present value of any remaining payments plus accrued and unpaid interest, if applicable.
We believe that the offerings of senior notes will increase the company’s debts and in turn, might inflate its financial obligations and hurt profitability. However, the redemption of notes will be a relief.

Danaher’s Debt Profile

It is worth mentioning here that the company's long-term debt at the end of the second quarter of 2020 stood at $22.4 billion, reflecting a decrease of 1.6% from the previous quarter and an increase of 4.2% from 2019 level.

Notably, Danaher borrowed $7,691.3 million in the first half of 2020 through instruments with a maturity of more than 90 days. Also, the company repaid $3,750 million of such borrowings during the same time frame. At the end of second-quarter 2020, Danaher’s total debt to total capital stood at 38.1%.

The company’s ability to fund financial obligations — reflected from its times interest earned — decreased from 25.3X at the end of first-quarter 2020 and 31.4X at the end of the fourth quarter of 2019 to 20.0X at the end of second-quarter 2020. High debts and the inability to repay them might be concerning for Danaher in the quarters ahead.

Zacks Rank, Price Performance and Estimate Trends

With a market capitalization of $148.8 billion, Danaher currently carries a Zacks Rank #2 (Buy). The company is likely to benefit from growth opportunities within the Life Sciences and Diagnostics segments, acquired assets, solid product offerings, focus on innovation, and shareholder-friendly policies.

In the past three months, the company’s share price has gained 18.4% compared with the industry’s growth of 9.8%.


Also, the Zacks Consensus Estimate for its earnings has been raised 0.9% to $5.47 for 2020 and 0.8% to $6.32 for 2021. Notably, there was one upward revision in estimates for 2020 and 2021, while no downward revision was recorded during the past two months.

Danaher Corporation Price and Consensus


Danaher Corporation Price and Consensus
Danaher Corporation Price and Consensus

Danaher Corporation price-consensus-chart | Danaher Corporation Quote

Other Stocks to Consider

Three other top-ranked stocks in the industry are HC2 Holdings, Inc. HCHC, Icahn Enterprises L.P. IEP and Raven Industries, Inc. RAVN. While HC2 Holdings sports a Zacks Rank #1 (Strong Buy), both Icahn Enterprises and Raven carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, bottom-line estimates for these companies have improved for the current year. Further, earnings surprise for the last reported quarter was 166.67% for HC2 Holdings, 402.22% for Icahn and 212.5% for Raven.

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