PerkinElmer Inc. made a bet-the-farm offer to take over Beckman Coulter Inc. and had the highest bid in the final hours of this month’s auction for the medical- equipment maker, according to regulatory filings and people with knowledge of the matter.
It still lost. Danaher Corp., more than 10 times PerkinElmer in size, jumped in to top the company’s $83.25 bid by 25 cents a share, said the people, who declined to be identified because the talks were private.
The outcome has left PerkinElmer to consider whether it should find another large company to buy or whether it should put itself up for sale after it spent months pursuing Beckman, the people said. PerkinElmer’s market value is less than half of the $6.8 billion Danaher agreed to pay for Beckman. A purchase would have added diagnostic equipment to Waltham, Massachusetts- based PerkinElmer’s genetic screening and environmental testing businesses.
Beckman’s board, working with adviser Goldman Sachs Group Inc., determined that Washington-based Danaher represented the “best overall transaction” for shareholders, with a greater chance of closing the deal, according to a Beckman regulatory filing. While PerkinElmer had lined up about $7 billion in financing for a deal, according to the people, Danaher is using cash to fund about 25 percent of the acquisition, with the rest coming from debt and equity.
Potential Buyers
Initially, nine parties in addition to Danaher expressed interest in acquiring Brea, California-based Beckman for at least $70 a share, and had signed confidentiality agreements as of Dec. 10, according to a filing this month. After revised offers were received Dec. 22, Danaher’s $70 bid was one of the two lowest. The company was given several opportunities to re- enter the contest, the filing shows.
Mary Luthy, a spokeswoman for Beckman Coulter, said the company has no comment on the negotiations beyond what was disclosed in its regulatory filing.
Andrea Rachman, a spokeswoman for Goldman, declined to comment. Stephanie Wasco, a spokeswoman for PerkinElmer, and Matt McGrew, a spokesman for Danaher, didn’t return calls and e- mails seeking comment.
Four Parties
Four parties remained interested as of Wednesday, Feb. 2, according to the filing. Besides Danaher, bidders for Beckman included a combined offer from Apollo Global Management LLC and the Carlyle Group and a second private equity bid from TPG Capital and Blackstone Group LP, said people with knowledge of the talks. PerkinElmer was also still in, the people said.
Danaher was told Feb. 3 its offer wasn’t sufficient. The next day, Chief Executive Officer Lawrence Culp Jr. called Beckman Chairman Glenn Schafer to express his continued interest in acquiring the company, according to the filing, and Danaher, advised by Morgan Stanley, told Goldman it would increase its offer and was let back in.
The Apollo Carlyle group left the process before it got into the very final stages, two people said. That offer never reached $80, said one person familiar with their bidding.
Danaher, PerkinElmer and the TPG-Blackstone group continued to re-bid all weekend ahead of the purchase announcement on Monday, Feb. 7. PerkinElmer, referred to as “Potential Purchaser No. 3” in the filing, according to the people with knowledge of the talks, had said in a revised letter of interest Dec. 22 that it would go as high as $83 a share, the highest proposed bid at that point.
Higher Offer
PerkinElmer later submitted an offer of $83.25 a share as the auction came to a close on Sunday, Feb. 6. Danaher had bid $83, while the TPG-Blackstone offer stopped at $81.11, according to the filing and people with knowledge of the process.
Goldman went back to Danaher and told the company that it would win the Beckman auction if it bumped its bid to $83.50. That move put Danaher above PerkinElmer, and PerkinElmer wasn’t offered a chance to rebid at that point, said the people familiar with the discussions. At 11:30 p.m. California time that night, the board was told Danaher had raised its bid and voted to accept the deal, the people said.
Raising enough capital to acquire Beckman would have been a challenge for PerkinElmer, said Peter Lawson, an analyst at Mizuho Securities USA Inc. in New York. PerkinElmer’s market value is about $3.3 billion.
‘Old-School Diagnostic’
“It would have been a difficult acquisition and it probably wouldn’t have been the best fit,” Lawson said today in an interview. “Beckman’s business is very old-school diagnostic. The 25 percent of revenues for PerkinElmer that are diagnostic-related are at the higher end of a molecular diagnostic approach.”
Danaher is a better fit for Beckman because it’s a “high quality, almost private equity-like company” that could “buy a No. 4 or No. 5 player and turn it into a No. 1 player,” Lawson said.
The bidding war over Beckman, and Quest Diagnostics Inc.’s announcement today that it will buy Thermo Fisher Scientific Inc.’s Athena Diagnostics unit, signals that more such deals are likely, Lawson said.
“We’re definitely seeing an acceleration in both the life- science tool space and the diagnostics space,” Lawson said.
Quicker Closing
Banks often advise companies to accept offers from larger buyers that have more cash and available financing. In considering Danaher’s bid against Beckman’s, Goldman cited “a substantially higher certainty of closing,” a lower breakup fee and a deal structure that would result in a quicker closing, among other items. Those factors trumped the financing PerkinElmer had lined up with help from its adviser, Bank of America Corp.
PerkinElmer is still working with Bank of America and has yet to decide whether to pursue another acquisition or put itself up for sale, the people said. A purchase of Beckman would have almost tripled PerkinElmer’s $1.7 billion in annual sales.
While PerkinElmer’s projections for 2011 rely on surplus cash being used for deals, “the overall portfolio strategy of the company remains unclear,” according to a Feb. 15 report from Chicago-based Zacks Investment Research, which has a neutral rating on the stock. [LOL—since when is Zacks considered an expert on these sorts of things?]PerkinElmer has made at least 10 acquisitions since 2009, including VisEn Medical Inc., a molecular imaging company, last year.‹
[PKI is up 6% today as I’m typing, although it was down earlier in the day, so it’s hard to know how much of today’s movement to attribute to the quarterly results announced after the close yesterday. Objectively, PKI is firing on all cylinders and is a first-rate company that’s worth considering as a core healthcare/technology holding that benefits strongly from The Global Demographic Tailwind[#board-15427]. PKI is a pseudo-conglomerate, however, so it may be too “boring,” for some of the posters on this board.
Based on PKI’s 2011 non-GAAP EPS guidance of $1.64-1.68, the P/E ratio at the current share price is about 13x, which is quite attractive, IMO, for this well-run growth company.]
• Revenue from continuing operations of $479 million, revenue growth of 14% and organic revenue growth of 6%[“organic” growth excludes acquisitions and currency swings]
• Operating income from continuing operations of $37 million; Adjusted operating income of $68 million, up 80 basis points
• GAAP earnings per share from continuing operations of $0.25; Adjusted earnings per share of $0.42, up 27%
• Raises full year adjusted EPS guidance[to $1.64-1.68 from old range of 1.62-1.67]
WALTHAM, Mass.--(BUSINESS WIRE)-- PerkinElmer, Inc. (NYSE:PKI), a global leader focused on improving the health and safety of people and the environment, today reported financial results for the second quarter ended July 3, 2011. The Company reported GAAP earnings per share from continuing operations of $0.25, as compared to $0.40 in the second quarter of 2010. On a non-GAAP basis, which includes the adjustments noted in the attached reconciliation, the Company announced adjusted earnings per share of $0.42, exceeding the Company’s prior guidance of $0.38-$0.40, representing an increase of 27% as compared to the second quarter of 2010.
Revenue from continuing operations in the second quarter of 2011 was $479.5 million, up 14% as compared to the same period a year ago. Organic revenue, which includes the adjustments noted in the attached reconciliation, increased 6% as compared to the second quarter of 2010. Revenue from continuing operations in the Human and Environmental Health segments increased by 11% and 16%, respectively, as compared to the same period a year ago. Organic revenue, which includes the adjustments noted in the attached reconciliation, increased 2% in the Human Health segment and 9% in the Environmental Health segment compared to the second quarter of 2010.
“We are pleased with our performance in the second quarter of 2011, generating strong growth in revenue and adjusted earnings per share, particularly considering the comparison against our strong financial performance in the second quarter of 2010,” said Robert Friel, chairman and chief executive officer of PerkinElmer. “In the first half of 2011, we have made significant progress toward our strategic initiative of increasing the growth profile of the Company including the addition of several strategic acquisitions as well as continued progress against our multi-year productivity initiatives.”
Operating income from continuing operations for the second quarter of 2011 was $37.5 million, as compared to $33.2 million for the same period a year ago. Adjusted operating income, which includes the adjustments noted in the attached reconciliation, increased by 80 basis points to $68.4 million, as compared to $55.9 million in the second quarter of 2010.
Financial Overview by Reporting Segment
Human Health:
• Revenue from continuing operations of $219.2 million[46% of total revenue] for the second quarter of 2011, as compared to $197.5 million for the second quarter of 2010. • Operating income from continuing operations of $27.6 million, as compared to $25.8 million for the same period a year ago. • Adjusted operating profit margin was 19.8%, a decrease of approximately 70 basis points as compared to the second quarter of 2010.
Environmental Health:
• Revenue from continuing operations of $260.2 million[54% of total revenue] for the second quarter of 2011, as compared to $224.1 million for the second quarter of 2010. • Operating income from continuing operations of $20.7 million, as compared to $16.7 million for the same period a year ago. • Adjusted operating profit margin was 13.4%, an increase of approximately 240 basis points as compared to the second quarter of 2010.
Financial Guidance
For the full year 2011, the Company forecasts organic revenue to increase in the mid-single digit range relative to 2010. The Company forecasts GAAP earnings per share from continuing operations in the range of $0.98 to $1.02 and on a non-GAAP basis, which is expected to include the adjustments noted in the attached reconciliation, adjusted earnings per share in the range of $1.64 to $1.68 as compared to the Company’s previously communicated guidance range of $1.62 to $1.67.
Conference Call Information
The Company will discuss its second quarter results and its outlook for business trends in a conference call on August 4, 2011 at 5:00 p.m. Eastern Time (ET). To access the call, please dial (617) 614-2704 prior to the scheduled conference call time and provide the access code 33633094. A playback of this conference call will be available beginning 8:00 p.m. ET, Thursday, August 4, 2011. The playback phone number is (617) 801-6888 and the code number is 16188594.
A live audio webcast of the call will be available on the Investor section of the Company’s Web site, www.perkinelmer.com. Please go to the site at least 15 minutes prior to the call in order to register, download, and install any necessary software. An archived version of the webcast will be posted on the Company’s Web site for a two week period beginning approximately two hours after the call.‹
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