Danaher pharma deal is a win-win remedy

Nora Nguyen
February 28, 2019

The business, which makes instruments, cell culture media and software for the development and production of drugs, is expected to generate approximately $3.2 billion of revenue in 2019, according to Danaher.

In pre-market trading Monday, GE shares were jumping 14.26 percent to $11.61, their highest level since late October.

"This news meaningfully accelerates our deleveraging plan", Culp, who ran Danaher for more than a decade until 2014, said in an interview.

The company's shares rose 10 percent in response.

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Under the deal, GE will receive a total consideration of $21.4 billion, including $21 billion in cash as well as Danaher's assumption of certain pension liabilities.

Culp told CNBC that GE chose to break up the Life Sciences unit as the biopharma business is distinct from the pharmaceutical diagnostics business. Culp is trying to pull GE out of a two-year tailspin that saw stock losses wipe out more than $200 billion shareholder value.

GE received plenty of interest in the bio-pharma operations, Culp said, and the deal with Danaher came together over the past few months. The transaction is expected to close in the fourth quarter of 2019, subject to regulatory approvals and customary closing conditions. In 2018, it generated revenue of around $3bn. After being named as the new CEO last fall, Larry Culp said GE needed to simplify its business structure even more. When the deal with Danaher closes, GE Biopharma will become part of that company's own Life Sciences division.

Another analyst, Dan Brennan of the investment bank UBS, said it "looks like a great fit" for Danaher, particularly given how it fits with a previous acquisition of Pall, he wrote in a February 25 note to investors. That will leave GE with a US$17 billion business manufacturing MRI machines and other imaging equipment.

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GE said this month that it would downsize its world headquarters in Boston and return $87 million in incentives it received from MA for moving from CT three years ago.

Danaher expects to finance the all-cash transaction with approximately $3 billion of proceeds from an equity offering (which may include an offering of mandatory convertible preferred shares), and the remainder from available cash on hand and proceeds from the issuance of debt and/or new credit facilities.

"We're going to focus on improving our core imaging business while we evaluate other options". Last year, it bought Integrated DNA Technologies, a gene-sequencing and editing company, for $2 billion. He is GE's first CEO to be hired from outside the company. "This was too good of an opportunity" for GE to pass up.

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