Pall Corporation (PLL) April 30, 2012 10:00 am ET Executives Lawrence D. Kingsley - Chief Executive Officer, President and Director Lisa McDermott - Chief Financial Officer and Treasurer Analysts Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division Kevin R. Maczka - BB&T Capital Markets, Research Division S. Brandon Couillard - Jefferies & Company, Inc., Research Division Christopher S. Parkinson - Crédit Suisse AG, Research Division Jonathan P. Groberg - Macquarie Research David L. Rose - Wedbush Securities Inc., Research Division Brian Drab - William Blair & Company L.L.C., Research Division Tracy Marshbanks - First Analysis Securities Corporation, Research Division Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division Presentation Operator
So let's start with the transaction terms, which are on Slide 4. The agreement entails certain business assets of our blood collection, filtration and processing product lines, including related blood filter media manufacturing capability. Haemonetics is the acquirer of the product line, as you know. Our customers in this market are the blood bankers using the Pall filters to prepare donor blood for transfusion.And so included in the transaction are the associated customer lists, the manufacturing plants and the know-how. The transaction involves the transfer of manufacturing facilities in California, in Mexico and Italy and a portion of our operations on our campus in Puerto Rico. Once the transaction closes, approximately 1,300 Pall employees or about 10% of our total headcount will transition over to Haemonetics. Pall and Haemonetics have had a long-standing commercial relationship and this will continue. We will be supplying them blood filter media, while we work through this transfer of vat manufacturing capability that I mentioned. And that will be within a period of about 4 years. The sale price, as I said, is about $550 million, of which $535 million will be paid upon closing. We estimate the after-tax proceeds on this pay thing will be about $430 million. We expect to record an after-tax gain of $230 million to $240 million or $1.95 to $2.04 per share. Final determination of the proceeds, the gain on the sale and the tax impact is subject to working capital and other certain adjustments and final allocation of proceeds by jurisdiction. The transaction is subject to certain closing conditions, regulatory approvals and labor-related notifications. We expect that, that will close at the beginning of our new fiscal year or approximately August 1. So those are the salient facts related to the transaction. I'm going to turn to Slide 5. Why are we doing it? What's the rationale? With after careful consideration, we decided to take this action to sharpen our strategic focus. We believe that it is the best fit for our customers, our employees and our shareholders. Customers will benefit from Haemonetics' comprehensive product offering and commitment to supporting them through the entire blood collection process.
We think it's a great opportunity for employees who will become part of an organization where blood handling is the core business. Our shareholders benefit because we believe that the strategic value assigned to the transaction, now coupled with the resulting structural actions that it enables, maximizes both short- and long-term value.And at the same time, this move enables us to focus on markets and opportunities where we are best positioned for growth such various life science and industrial end markets, where we are even #1 or we're very well positioned. And let me just reinforce that we do not intend to divest other businesses or product lines. And certainly, we're investing in life science in general and the other medical products as well within life science. Our blood filtration technologies will definitely complement Haemonetics' strategy. In with the addition of our blood transfusion product line, we believe that they will be well positioned for future success. We also think that they'll be an excellent owner of these assets. So in summary, this divestiture has significant strategic merit. We ultimately expect it to improve our profitability and enhance our long-term growth rate. And now what are the short- and longer-term impacts to the P&L. I'm on Slide 6. As the transaction will not close until FY '13, we do not expect it to have any material impacts on the current year, other than our presentation as a discontinued operation, that is. As shown on Slide 6, so you can see for purposes of modeling next year, in the future, we expect about $230 million of revenue for the blood business for fiscal '12. Operating profit is expected to be about $60 million, and we're assuming $0.38 of EPS contribution for this year. Read the rest of this transcript for free on seekingalpha.com