Danaher said today it will acquire Pall for about $13.8 billion, then split into two independent, publicly-traded companies.
Pall is a global provider of filtration, separation and purification systems for the life sciences and other industries. Life sciences—which includes segments focused on biopharmaceuticals, medical, and food & beverage—accounted for more than half ($1.5 billion) of Pall’s $2.8 billion in revenues for its most recent fiscal year, which ended July 31, 2014; the rest came from the company’s industrial segment, which serves aerospace, microelectronics, and process technologies customers.
Pall’s life-sci presence presented the opportunity for an attractive acquisition, according to Danaher President and CEO, Thomas P. Joyce Jr.
“Pall will provide us a leading business with significant runway for expansion and strengthens our life sciences position in the strategically-attractive, high-growth biopharmaceutical market,” Joyce said in a statement. “Pall is a highly attractive business, with approximately 75% recurring revenues, mid-single digit organic growth and a solid margin profile. Its best-in-class technology, combined with the broadest, most technically-advanced solutions, make it the premier brand in the filtration industry.”
Danaher is a global science and technology tools and equipment provider with one of its five business segments focused on life sciences and diagnostics. The other four segments are dental, environmental, industrial technologies, and test & measurement. Danaher finished last year with $19.9 billion in revenue.
Headquartered in Washington, Danaher has 71,000 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.
Pall, which is headquartered in Port Washington, NY, employed approximately 10,400 persons as of July 31.
“This transaction delivers substantial value to our shareholders and creates an incredible opportunity for long-term growth that will benefit all of our stakeholders,” Pall Chairman and CEO Larry Kingsley said in a separate statement issued by his company.
Pall’s operations will be folded into one of the two new successor companies to Danaher, which will retain the Danaher name and focus on “science and technology growth.” That entity will begin with annual revenues of approximately $16.5 billion, including Pall’s revenues. The other successor company, at about $6 billion in annual revenues, will be “a diversified industrial growth company” capable of generating “tremendous” free cash flow thanks to market leadership and strong brand names.
The successor companies are expected to be created through a tax-free separation, Danaher said.
Joyce will remain president and CEO of the new Danaher company, with Daniel L. Comas serving as evp and CFO, the same position he now holds for today’s Danaher. James A. Lico, now evp with responsibility for Danaher's Test & Measurement and Gilbarco Veeder-Root businesses, will become president and CEO of the industrial-growth successor company.
At $127.20 per share cash, Danaher’s offer for Pall represented a 28% premium above Pall's closing price of $99.31 on Monday, before the first news reports surfaced that Pall was for sale, with Danaher and Thermo Fisher Scientific emerging as potential buyers. Danaher said it expects to finance the transaction primarily with available cash and proceeds from the issuance of debt or new credit facilities.
Danaher estimated the Pall acquisition will add approximately $0.40 to its non-GAAP, adjusted diluted net earnings per share in 2016, excluding non-cash amortization, purchase accounting and transaction expenses.
Danaher’s acquisition of Pall has been unanimously approved by the boards of both companies, with Pall’s board unanimously recommending that company shareholders approve the deal. The transaction is subject to Pall shareholder approval—as well as customary conditions that include regulatory approvals—and is expected to be completed “around the end of calendar year 2015,” Danaher said.