NEW YORK (GenomeWeb) – Danaher said today that it plans to acquire Cepheid for nearly $4 billion in cash. The deal is expected to close by the end of the year.
Under the terms of the merger agreement, Danaher will acquire all of Cepheid's outstanding stock for $53.00 per share, a 54 percent premium to Friday's close. Including Cepheid's indebtedness, this represents a total enterprise value of approximately $4 billion.
Cepheid develops, manufactures, and markets molecular systems and tests, including the automated GeneXpert system that enables genetic testing for healthcare-associated infections, as well as sexual health and critical infectious diseases, and oncology.
More than 11,000 GeneXpert systems are installed in 182 countries, according to Cepheid, enabling one to eighty tests to be performed at the same time and allowing flexibility in throughput requirements that may appeal to many types of customers, including those operating in low-volume point-of-care settings and high-volume reference laboratories. Using proprietary test cartridges, the GeneXpert menu offers 23 tests outside the US and 20 tests in the US.
"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," Danaher President and CEO Thomas Joyce said in a statement.
Cepheid generated annual revenues of $539 million in 2015. Greater than 75 percent of these revenues are considered recurring, according to Danahar. In 2016, Cepheid expects to generate revenues in a range of $618.0 to $635.0 million.
Cepheid will become part of Danaher's Diagnostics segment, joining Beckman Coulter, Leica Biosystems, and Radiometer.
Danaher said it expects that the Cepheid acquisition will be moderately dilutive to GAAP-diluted net earnings per share and approximately $0.05 accretive to non-GAAP, adjusted net earnings per share in the first full year post acquisition. The company added that it expects the acquisition to be approximately $0.30 accretive to non-GAAP, adjusted diluted net earnings per share in the fifth full year post acquisition. The non-GAAP, adjusted diluted net earnings per share figures exclude non-cash amortization, purchase accounting charges, and transaction expenses attributable to the acquisition.
Danaher expects to finance the transaction with available cash and proceeds from the issuance of debt.
"We believe the transaction makes strategic sense as Danaher has a large diagnostics business, but lacks a strong presence in the molecular space," Piper Jaffray analyst William Quirk wrote in a research note this morning.
"We think [Danahar] can hit the year-one accretion target by cutting corporate costs," wrote Wells Fargo analyst Tim Evans, "but the fact that the longer-term accretion target is a five-year target suggests to us that this deal is not solely about cost-cutting."
The acquisition has been unanimously approved by the board of directors of Danaher and Cepheid.
Cepheid's shares soared more than 52 percent to $52.36 in morning trading on the Nasdaq. Danahar shares dipped half a percent to $80.72 on the New York Stock Exchange.