Danaher Grabs Pall for $13.8B and Plans to Split Merged Company

NEW YORK (The Deal) -- Danaher (DHR) said Wednesday it would acquire Pall (PLL), which makes water-filtration products, for $13.8 billion in cash and debt and then split the merged entity into two independent companies.

Terms of the deal call for Washington-based Danaher to pay $127.20 per share in cash for Pall, a premium of 7.2% to the target's close. Danaher said that after the merger closes, it will separate into a science and technology company, which would include the Pall assets, and an industrials firm, which would take a new name.

Port Washington, N.Y.-based Pall is a maker of filtration, separation and purification products, generating $2.8 billion in annual sales from the life sciences and industrials markets. The company's $1.5 billion life sciences segment serves pharmaceuticals, food and beverage, and medical end markets, while the industrials segment caters to aerospace and electronics among other uses.

TheStreet's Trifecta Stocks model portfolio holds shares of Danaher, and managers Bryan Ashenberg and Bob Lang expect the stock to rise on the acquisition news.  

Danaher CEO Thomas P. Joyce Jr. said in a statement that Pall is "the premier brand in the filtration industry," with strong margins and reliable organic growth. The company expects Pall to contribute about 40 cents per share to non-GAAP 2016 earnings per share.

"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.

Danaher, named after its founders' favorite Montana fishing stream, has been an aggressive consolidator since being formed as a platform for 1980s corporate raiders Steven and Mitchell Rales. Industrial bankers say the company has been on the hunt for a big deal since last summer while at the same time transitioning from longtime CEO H. Lawrence Culp to Joyce.

The company said that it intends to split by the end of 2016, creating an industrials firm with $6 billion in annual sales that makes a range of sensors and instruments for test and measurement, retail fueling, telematics and automation. Danaher said that firm, which will be named before the split, is expected to have "an outstanding margin profile and tremendous free cash flow generation," which should give it flexibility in deploying capital.

What remains at Danaher will have about $16.5 billion in annual sales and opportunities for growth in life sciences and diagnostics, dental, water quality and related businesses.

"Danaher has always been at its best when all platforms have the ability to invest in the highest impact organic growth opportunities, pursue meaningful acquisitions and use the Danaher Business System to continuously improve performance," Joyce said. "Each company will be more focused with access to the capital necessary to pursue organic and inorganic growth opportunities."

After the split, Joyce and CFO Daniel L. Comas will remain at Danaher, while James A. Lico, current executive vice president with responsibility for the test and measurement businesses, will become CEO of the split-off entity.

Lico said that after the separation the unit will have "a renewed emphasis on M&A for many of these businesses."

Read more from:

More from Mergers and Acquisitions

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

AT&T-Time Warner Ruling Could Usher in More Healthcare Deals

AT&T-Time Warner Ruling Could Usher in More Healthcare Deals

Dropbox Soars in Third-Straight Record-Setting Session

Dropbox Soars in Third-Straight Record-Setting Session

Decision on AT&T's Merger With Time Warner Marks a Monumental Week for M&A

Decision on AT&T's Merger With Time Warner Marks a Monumental Week for M&A

JPM's Head of North America M&A Wants to Super-Charge M&A and Hire More Women

JPM's Head of North America M&A Wants to Super-Charge M&A and Hire More Women