Danaher Identifies Products It Wants in X-Rite Buy

NEW YORK ( TheStreet) -- Industrial conglomerate Danaher ( DHR) is buying X-Rite ( XRIT) for $5.55 a share or an enterprise value of roughly $625 million.

Danaher is buying X-Rite at a near 40% premium to Monday's closing price and will take in a specialty operation that has returned to profitability after reducing a heavy debt burden that weighed on earnings. With X-Rite, Danaher will get the company's Pantone brand, a leading manufacturer color systems that are key for printing companies, graphic designers, and photographers.

"We are excited about the opportunity to acquire two premier brands in X-Rite and Pantone," said William K. Daniel, executive v.p. of Danaher." If the deal closes, which Danaher expects to happen in the second quarter, X-Rite will operate as a stand-alone company within Danaher's product identification group and will retain its brands. The acquisition should also benefit Danaher's digital packaging unit, Esko.

"Along with Videojet and Esko, we believe X-Rite and Pantone will further Danaher's leading position in the product identification industry and present an attractive value creation opportunity."

The cash offer is subject to a tender offer, which Danaher said that 68% of X-Rite shareholders have already agreed to. According to Bloomberg compilations of Securities and Exchange Commission filings, X-Rite's largest shareholders are JPMorgan with a 39% stake and Sagard Capital with 15% of X-Rite's outstanding shares.

X-Rite shares rose nearly 40% in pre-market trading to $5.59, slightly above Danaher's offer price. Prior to Tuesday's deal the company's shares dropped nearly 14% year-to-date. Danaher shares were little changed at $54.59.

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In 2011, Grand Rapids, MI-based X-Rite reported a record profit of nearly $50 million on growing revenues and a drop in interest expense. Since 2009, the company has pared a debt burden of $270 million down to roughly $150 million, helping the company to turn successive profitable years after a string of losses, which peaked at nearly $120 million in 2009.

With X-Rite, Danaher will add $237 million in annual revenue to its industrial technologies unit that generated over $3 billion in sales or nearly 20% of its overall revenue.

In March, Bloomberg reported that Danaher and Cooper Industries ( CBE) are looking to sell a joint venture that makes hand tools for Sears Holdings ( SHLD) Craftsman brand. The venture, called Apex Tool Group, could be sold for $1.5 billion or more, according to Bloomberg reports citing unnamed sources.

For more on industrial M&A, see why a Thomas Bett's acquisition by ABB could spark deal making

-- Written by Antoine Gara in New York