Proceeds will be leveraged for strategic acquisitions and stock repurchases.
PerkinElmer is selling its Illumination and Detection Solutions (IDS) business to Veritas Capital Fund III, L.P., a New York-based private equity firm, for approximately $500 million in cash. PerkinElmer expects to receive a net payment of $482 million and will use the money to pad its life science business and for stock repurchases.
“The divestiture of our IDS business reduces the complexity of the company and frees up capital to reinvest in our more attractive Human Health and Environmental Health end markets,” explains Robert Friel, chairman and CEO of PerkinElmer. “In addition, this transaction should reduce the company’s exposure to more cyclical end markets and improve our top-line growth profile. Furthermore, we would expect adjusted gross margins to improve by over 200 basis points, contributing to higher earnings growth.”
IDS includes approximately 3,000 employees and 14 manufacturing facilities worldwide. It provides custom-designed specialty lighting and sensor components, subsystems, and integrated solutions to OEMs serving the health, environmental, and security segments. The business is expected to generate approximately $300 million in 2010 revenue.
PerkinElmer also says that its board of directors has authorized an increase in the number of shares of common stock available for repurchase to 13 million. Purchases will be made through open market transactions or privately negotiated transactions, subject to market conditions and trading restrictions.
As a result of the agreement to sell IDS, PerkinElmer forecasts organic revenue for the third quarter as well as full year to grow at a high single-digit rate. For the third quarter GAAP earnings per share from continuing operations is predicted to be in the range of $0.19 to $0.21 and on a non-GAAP basis, in the range of $0.27 to $0.29. For the full year 2010, PerkinElmer expects GAAP earnings per share of between $1.06 to $1.11, and on a non-GAAP basis, in the range of $1.24 to $1.29.
The acquisition is expected to close by the end of this year. Although the company has not issued guidance for 2011, it anticipates that the transaction will be $0.08 to $0.10 dilutive in 2011 or 5–6%.