Danaher Coughs Up About $4 Billion for Diagnostics Maker Cepheid

Published: Sep 06, 2016

Danaher Coughs Up About $4 Billion for Diagnostics Maker Cepheid September 6, 2016
By Alex Keown, BioSpace.com Breaking News Staff

SUNNYVALE, Calif. – Shares of Cepheid are soaring more than 50 percent in pre-market this morning after Washington, D.C.-based Danaher Corporation announced it struck a $4 billion deal to acquire the molecular diagnostics company.

Danaher said it acquired the company to be a complement to its existing diagnostics business and “expand our runway for growth across the platform.” Danaher said it will combine Cepheid with its $5 billion revenue position in the diagnostics industry. The acquisition of the company is expected to expand margins and drive long-term growth, Danaher said. Cepheid manufactures various diagnostics systems that can be used to manage infectious diseases and cancers, as well as genetic-based disorders. Cepheid’s GeneXpert System offers 23 tests outside the U.S., and 20 tests in the U.S.

“Cepheid's extensive installed base, test menu and innovative product offering contribute to its market leadership in molecular diagnostics and we expect it to strengthen our position in this high-growth segment,” Thomas Joyce, president and chief executive officer of Danaher said in a statement.

As part of the Danaher diagnostics segment, Danaher said Cepheid will join the company's Beckman Coulter , Leica Biosystems and Radiometer businesses.

John Bishop, chairman and CEO of Cepheid, said in a statement that the deal will be a boon for Cepheid. He said becoming part of Danaher will allow the company to “reach an extended level of customers and patients more quickly than we could have on a standalone basis,"

Under terms of the deal, Danaher will acquire all of the outstanding shares of Cepheid common stock for $53 per share in cash. The deal is expected to close by the end of the year. Shares of Cepheid are currently trading at $52.28 per share. The stock closed Friday at $34.42 per share. Shares of Danaher Corporation are down this morning, trading at $79.45. Danaher expects to finance the transaction with available cash and proceeds from the issuance of debt. Danaher said it expects the acquisition will add about 30 cents to its adjusted earnings in the fifth full year following the closure of the deal.

Danaher has undergone a recent split into two separate companies–New Danaher and Fortive. According to the Washington Business Journal, the split will see Danaher keep “its life sciences, diagnostics, dental, water quality and product identification segments.” The new entity, Fortive, will include test and measurement, industrial technologies and petroleum segments, the Journal said.

Cepheid posted revenues of $539 million in 2015 and expects to generate revenues between $618 and $635 million, Marketwatch reported.

Fenwick & West is acting as Cepheid's legal adviser and Goldman Sachs is acting as Cepheid's financial adviser during the transaction.

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