Danaher to buy Beckman Coulter for $5.8 billion

NEW YORK (Reuters) - Danaher Corp has struck a deal to buy medical diagnostics company Beckman Coulter Inc for $5.8 billion cash, in its biggest bet yet on its growing medical technology business.

At $83.50 per share, the deal values Beckman at 11 percent more than its closing price on Friday and roughly 45 percent above the company's price in December before rumors of a takeover entered the marketplace.

Beckman shares jumped 9.7 percent to $82.49 in morning trading, a bit below the offer price -- suggesting investors do not expect a higher bidder to emerge. Danaher was up 4 percent at $49.90 after rising to $50.29, a lifetime high.

The transaction is valued at about $6.8 billion, including assumed debt, the companies said. They expect the deal to close in the first half of 2011.

About a quarter of the funding comes from cash on hand, 15 percent from equity and 60 percent from new assumed debt, Danaher said on a conference call with analysts.

An aging population and more emphasis on preventive medical care, along with growth of medical technology in markets like China, make clinical diagnostics an attractive $25 billion market, Danaher Chief Executive Officer Larry Culp said.

Beckman is growing at 25 percent a year in China, Danaher said.

Danaher outbid at least two private equity consortia -- one made up of Blackstone Group and TPG Capital, the second made up of Apollo Management and Carlyle Group -- that also submitted final offers for Beckman last week, people familiar with the matter told Reuters.

"It certainly seems like Danaher is paying a very full price, but it does (tilt) it toward diagnostics and life sciences," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. "This is a more stable business than some of Danaher's cyclical businesses."

PUSH INTO EMERGING MARKETS

Medical technology, including dental, will account for nearly half of Danaher' sales after the Beckman deal, but longer-term medical will account for closer to 40 percent of revenue, which totaled $13.2 billion in 2010. For the balance of the year, Danaher acquisitions will be bolt-ons outside the medical space, CEO Culp said.

Culp said Danaher remained committed to being a multi-industry science and technology company.

Danaher has forecast faster growth in countries like India and China this year, citing increasing reliance on digital technology, demand for environmental technology and a global push for energy efficiency. [ID:nN15164703] It gets about a fifth of sales from emerging markets, up from about 12 percent in 2004.

Danaher could cut costs by about $250 million over several years because of the deal. The acquisition will add 5 cents to 10 cents a share to earnings this year and 25 cents to 30 cents in 2012.

Beckman Coulter, which has annual revenue of about $3.7 billion, would become part of Danaher's Life Sciences and Diagnostics segment, which includes its imaging and testing businesses. About half its sales come from North America and a quarter from Europe.

Morgan Stanley was the sole financial adviser to Danaher, while Goldman Sachs advised Beckman Coulter.

Last December, Beckman hired Goldman to help with the possible sale of the company.

Prior to that, Beckman had experienced a volatile year in which CEO Scott Garrett suddenly resigned after a product recall.

Washington-based Danaher, whose products also include environmental testing equipment, said in December that it could spend about $4 billion on acquisitions within the next year-and-a-half.

The company gets high marks among investors for the way its Danaher Business System integrates the many acquisitions it makes each year. It has remade its portfolio in recent years through both acquisitions and asset sales, to focus on faster-growing, more profitable businesses that are less dependent on cyclical demand.

Danaher has stepped up dealmaking, saying it would be both aggressive and disciplined, after spending about $1 billion on a dozen purchases in 2010, a relatively sluggish pace for an acquisitive company. Last month, Danaher sold an aerospace components unit to Britain's Meggitt for $685 million, but bought a digital packaging design company for about $470 million.

Earlier, Danaher spun off its tool business into a joint venture with Cooper Industries that could lead to a market listing.

Recent deals in the medical device sector include orthopedics maker Stryker Corp's $1.5 billion acquisition of a Boston Scientific Corp unit, and St. Jude Medical Inc's $1 billion purchase of AGA Medical Holdings Inc, whose products treat structural heart defects.

In December, Thermo Fisher Scientific Inc, the world's largest maker of scientific instruments, said it would buy Dionex Corp for $2.1 billion to broaden its lab equipment and environmental safety offerings.

(Additional reporting by Lewis Krauskopf, Soyoung Kim in New York, Scott Malone in Boston; Editing by Derek Caney and Lisa Von Ahn)