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business newsBeckman Coulter on the Block
By
Brett Chase
Dec 10, 2010 2:40 pm
A buyout of the diagnostics company could exceed $5 billion in value.
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Beckman Coulter reportedly put itself on the block a few weeks ago and -- despite a recent regulatory flap that led to CEO Scott Garrett’s resignation in September -- investors appear to be betting that a buyer will pay a hefty premium for the company.
Private equity shops are becoming increasingly more interested in health care companies in part because Obama’s health reform is expected to increase demand. Beckman Coulter is the type of cash-generating business that attracts private equity. Through nine months, the company had net income of $150 million on $2.7 billion in sales. It had just under $285 million in cash on hand as of September 30.
Another health care company, Charles River Laboratories (CRL) is being pushed by two of its largest investors to sell after private equity buyers expressed an interest in taking over that company.
While both of these companies are involved in drug discovery, Brea, California-based Beckman Coulter is a bigger, more diverse entity. The core business for Beckman Coulter is focused on laboratory instruments, software and supplies. Its diagnostics systems are used in hospitals and doctors’ offices.
Blackstone Group and Apollo Management are among the PE firms that approached Beckman Coulter, Bloomberg News reports.
Buyout firms are certain to go up against some deep-pocketed strategic buyers, however. General Electric (GE) proposed buying Abbott Laboratories’ (ABT) diagnostics business for more than $8 billion a few years ago. That deal was called off in July 2007 after the two sides couldn’t agree on final terms.
GE’s health care unit is a probable bidder for Beckman Coulter, as is 3M (MMM).
The “transaction premium to current prices could be substantial,” Leerink Swann analyst Dan Leonard says of a buyout price.
He notes that the proposed GE-Abbott deal and Siemens’ (SI) takeover of Dade Behring in 2007 yielded prices that represented 15 times those businesses’ operating profits. Using that measure, Beckman Coulter would command $160 a share, an unrealistic figure, Leonard notes. But he says a bid above $90 a share is not out of the question.
“We would expect that management's thinking is at least in the $90-plus ballpark,” he says.
Whether a deal gets done, is another question. Leonard maintains a hold rating on the stock.
“Recall that quality/regulatory concerns were a rumored factor as to why the GE/Abbott deal fell through,” he says.
No positions in stocks mentioned.
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