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September 6, 2016

Danaher to Acquire Cepheid for $4B

  • Danaher has agreed to acquire Cepheid for approximately $4 billion including debt, the companies said today, adding the molecular diagnostics developer and its tests to a buyer that recently narrowed its science and technology focus.

    Cepheid’s tests include fully automated GeneXpert® systems, which are designed to enable rapid, sophisticated genetic testing and provide test results for the management of infectious diseases, among clinical applications.

    “As a standalone company for the last 20 years, Cepheid has been a leading innovator in molecular diagnostics, to date installing more than 11,000 GeneXpert Systems and delivering tens of millions of tests spanning healthcare-associated infections, critical infectious disease, sexual health, and virology,” Cepheid Chairman and CEO John Bishop said in a company statement.

    “Looking forward as a part of Danaher and its $5 billion Diagnostics platform, we believe that Cepheid will be able to reach an extended level of customers and patients more quickly than we could have on a standalone basis,” Bishop added.

    Headquartered in Sunnyvale, CA, Cepheid will become part of Danaher's $5 billion Diagnostics segment, joining the Company's Beckman Coulter, Leica Biosystems, and Radiometer businesses.

    “We expect Cepheid to be an excellent complement to our existing Diagnostics businesses and to expand our runway for growth across the platform,” stated Danaher President and CEO, Thomas P. Joyce, Jr., in a separate statement by his company. “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.”

    The deal is Danaher’s first major acquisition since the company in July completed the spinout of its Test & Measurement segment, Industrial Technologies segment (except its Product Identification platform), and Retail/Commercial Petroleum platform through the creation of a new entity, Fortive Corp.

    The spinout was announced last year along with Danaher’s $13.8 billion acquisition of Pall.

    Headquartered in Washington, Danaher has 59,000 staffers or “associates.” Since the mid-1980s, Danaher has carried out an ongoing company-wide improvement effort based on lean manufacturing and anchored on a common culture and operating system, called the Danaher Business System, focused on people, plans, processes, and performance.

    “By applying the Danaher Business System and combining Cepheid with our existing $5 billion revenue position in the diagnostics industry, we believe that Cepheid will be well-positioned to improve operational efficiencies, significantly expand margins, and drive long-term growth,” Joyce added.

    Cepheid generated annual revenues of $539 million in 2015, with double-digit year-on-year organic revenue growth and greater than 75% of these revenues considered recurring. Cepheid has disclosed that in 2016 it expects to generate $618 to $635 million in revenues.

    At $53 per share, Danaher paid a 54% premium for Cepheid over that company’s closing share price Friday of $34.42.

    Danaher said it projected the acquisition of Cepheid would add 5 cents in non-GAAP, adjusted diluted net earnings per share in the first full year after acquisition—and 30 cents in non-GAAP, adjusted diluted net earnings per share in the fifth full year after completion of the deal.

    The buyer said it expects to finance the transaction with available cash and proceeds from the issuance of debt.

    The boards of both companies have unanimously approved the deal, which is expected to close by year’s end subject to customary conditions, including approval by Cepheid's shareholders and receipt of applicable regulatory approvals. Cepheid’s board has recommended that company shareholders approve the transaction.

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