Is Danaher experiencing buyer’s remorse?
General Electric’s deal to sell its Biopharma unit to the conglomerate might be in jeopardy, according to Gordon Haskett analyst John Inch, after several competitors posted weaker than expected results.
That’s not good new for General Electric (ticker: GE). The company expects to receive $20 billion cash from the asset sale and investors expect GE to use that cash to pay down debt with deal proceeds. Any problems with the
deal would certainly mean more volatility for GE shareholders.
The back story: Danaher agreed to buy GE Biopharma in February for more than $21 billion, or seven times sales. That was good news for GE shareholders: its stock price jumped 6.4% the day the deal was announced.
This deal is the largest sale undertaken by new GE CEOLarry Culp (and, incidentally, former CEO of Danaher). Since its announcement, investors have asked far fewer questions about GE’s debt and liquidity. But debt was a big concern for GE shareholders in the recent past, and the cash from this sale is not in the bank. The company still has high debt levels; industrial debt totaled more than $54 billion at the end of the first quarter.
What’s new: Life science equipment supplier
(A) dropped 11% after reporting earnings on Tuesday. The company cut its full-year sales guidance from $5.2 billion to $5.1 billion. Another health care equipment supplier,
(WAT) dropped 12% when it reported numbers back in April. On Waters’ earnings call, management cited weaker than expected demand Europe and China.
“The deteriorating life sciences market could still add risks that the deal is renegotiated or scuttled altogether,” Inch wrote in a Thursday research report. “We believe GE would opt to renegotiate the terms of the deal rather than see it fall apart, considering it would appear this deal is critical to meet the company’s debt reduction schedule and deleveraging commitments to the rating agencies and bondholders.”
GE wasn’t immediately available for comment, but it isn't certain earnings reports from Agilent or Waters would be justification for Danaher asking to reopen price negotiations.
Looking Ahead: In large M&A transactions, it’s typical to have a ‘break-up fee’ that to protect the seller if the buyer gets cold feet. It doesn’t appear that a termination fee is listed in the Danaher-GE deal documents, and GE has not responded to a request for clarification. But regardless of whether the deal includes one, it would be a small consolation prize for GE should the deal fall apart.
If something does scuttle the Biopharma deal, GE would likely proceed with an IPO of its entire health care business. That was Culp’s original plan before a buyer for the Biopharma franchise emerged.
GE still expects the biopharma sale to close in the fourth quarter of 2019 or the first quarter of 2020.
戈登•哈科特( Gordon Haskett )分析师约翰•因斯( John Inch )表示，通用电气( General Electric )将旗下生物制药( Biopharma )部门出售给该集团的交易可能处于危险之中，此前几家竞争对手公布的业绩低于预期。
这对通用电气来说并不是什么新鲜事（股票代码： GE ）。该公司预计将从此次资产出售中获得200亿美元现金，投资者预计通用电气将用这笔现金偿还交易收益中的债务。有关
丹纳赫（ DHR ）
这是通用电气 CEOLarry Culp （顺便说一下，丹纳赫公司前首席执行官）最大的一笔交易。自公告发布以来，投资者对通用电气的债务和流动性提出的问题要少得多。但在最近的一段时间里，债务是通用电气股东的一大担忧，此次出售所获得的现金并不在该银行。该公司的债务水平仍然很高，第一季度末工业债务总额超过540亿美元。
( A )在周二公布收益后下跌11%。该公司将全年销售指引从52亿美元下调至51亿美元。另一家医疗设备供应商，
( WAT )4月份公布数据时下跌了12%。在 Waters 的财报电话会议上，管理层指出，欧洲和中国的需求低于预期。
通用电气没有立即置评，但并不确定安捷伦或 Waters 的盈利报告会成为丹纳赫要求重新启动价格谈判的理由。
如果某件事真的破坏了生物制药的交易，通用电气可能会进行其整个医疗保健业务的 IPO 。这是 Culp 最初的计划，后来出现了一位收购 Biopharma 专营权的买家。