Why Danaher is Moving Forward with Corporate Split

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Life sciences, diagnostics, and dental businesses to remain with Danaher; rest to spin off into Fortive Corp.

Nancy Crotti

Danaher Corp. will split into two companies on July 2, completing the separation into two two independent, publicly traded ventures that it announced in May 2015.

The split will free the two entities to pursue more mergers and acquisitions, analysts told the Washington Post.

The company that will retain the Danaher name will consist of its existing life sciences, diagnostics, and dental businesses, as well as its water quality, and product identification businesses. These generated $16.5 billion and $3.9 billion in sales in 2015 and the first quarter of 2016, respectively. Those figures include the full annual revenues of Pall Corp., an air- and water-filter maker that Danaher said it would acquire for $13.8 billion when it announced the split, according to an SEC filing.

A new company, Fortive Corp., will house Danaher’s existing test and measurement, industrial technologies, and petroleum businesses, which together produced $6.2 billion and $1.5 billion of revenue in 2015 and the Q1 2016, respectively. Fortive will keep 22,000 of Danaher’s 81,000 employees in 40 countries, and is expected to generate revenue of $6 billion a year. It will be headquartered in Everett, WA, while “new” Danaher will remain in Washington, DC.

Danaher shareholders received one share of Fortive Corp. for every two shares of Danaher last week, according to the Post.

The company that will retain the Danaher name is “positioned for the renaissance in health-care research, with $15 billion in borrowing capability,” analyst Paul Knight of Janney Montgomery Scott, told the Post.

“They have the balance sheet to dominate the merger environment.”

Danaher began a buying spree after Thomas Joyce Jr. took over as CEO in 2014, according to Reuters. The company became a market leader in dental implants in 2015 when it acquired Swiss dental firm Nobel Biocare Holding for $2.1 billion. Danaher was also said to be a suitor for Alere, now slated for a $5.8 billion takeover by Abbott.

Over the past 30 years, brothers Steven and Mitchell Rales built Danaher into a global conglomerate by snapping up relatively unknown businesses, cutting costs, and instituting efficient management to generate maximum income, the Post story said.

Danaher became so large that investors and others had a hard time measuring its value. Its growth faltered, and it became apparent that some of its businesses would fare better in M&As and internally if they went off on their own, analyst Brian Langerberg of Langenberg & Co. told the Post.

Its founders and management tend to avoid publicity. The company did not immediately return a call for comment.

Nancy Crotti is a contributor to Qmed.

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