Agilent’s Evolution Since Spinoff May Lead to Takeover: Real M&A
2014-12-18 00:00:00.7 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Brooke Sutherland
(Bloomberg) -- Agilent Technologies Inc. may finally be the
right size for a takeover.
The $13 billion company completed the spinoff of its
electronic measurement business last month, the latest in a
series of moves to slim down since its separation from Hewlett-
Packard Co. about 15 years ago. Now, its narrowed focus on
faster-growing biological and chemical testing tools and its
strong emerging-markets presence could attract interest.
Agilent’s position in the market for tools that analyze
chemical mixtures is difficult to replicate and competitors that
want to be in the industry would be better off buying their way
in, said BTIG LLC. Danaher Corp., the $59 billion conglomerate
with billions to spend on acquisitions, could fill gaps in its
portfolio with an Agilent takeover, said FBR & Co. Thermo Fisher
Scientific Inc. is another potential suitor, according to
Jefferies LLC.
“With the two businesses split, the new Agilent becomes a
much cleaner potential acquisition target for a larger player in
the life-sciences space,” Brandon Couillard, a New York-based
analyst at Jefferies, said in a phone interview. “It’s one of
the most attractive businesses in the sector.”
Healthy Premium
Agilent may command about $48 a share, a 21 percent premium
to its closing price yesterday, based on similar deals, said
Tyler Howard, an analyst at Bellingham, Washington-based Saturna
Capital Corp., which oversees about $4 billion, including
Agilent shares. Ross Muken, a New York-based analyst at Evercore
ISI, estimates a price tag in the same range. He puts Agilent’s
fair value at $45 to $50 a share, and said any buyer would
probably have to pay a premium to that.
Representatives for Santa Clara, California-based Agilent
and Waltham, Massachusetts-based Thermo Fisher declined to
comment. A representative for Washington, D.C.-based Danaher
didn’t respond to a request for comment.
Since its split from Hewlett-Packard, Agilent has sold off
$6 billion in assets and completed two spinoffs of its own. That
includes this year’s initial public offering of its electronic
measurement business, Keysight Technologies Inc., which left
Agilent focused on life-science technology.
“One of the big issues with the combined company was there
was a lack of focus and they’d be better off separate -- well
now they are,” Michael Cuggino, president and fund manager at
Permanent Portfolio Family of Funds Inc. said in a phone
interview. “That makes them attractive as bolt-on acquisitions
to firms trying to gain share or to supplement existing business
lines.”
Cuggino helps oversee about $7 billion, including shares of
both Agilent and Keysight.
Market Leader
Agilent has a leading position in the market for liquid and
gas chromatography mass spectrometry tools, which are used to
analyze complex chemical mixtures for industries such as drug
research and food safety testing, said Dane Leone, a New York-
based analyst at BTIG. That’s a hard market to penetrate as a
new entrant, he said.
“Generally, buying someone with that pre-existing market
position is a better strategy,” Leone said.
That would be a motive for Danaher, which doesn’t have a
strong position in that area, said Ajay Kejriwal, a New York-
based analyst at FBR. The conglomerate could also cut costs and
improve profitability at Agilent by incorporating the company
into its management system, he said.
‘Deal Machine’
Danaher, the maker of everything from dental equipment to
water filters, has spent about $3 billion on takeovers since
May, including the $2 billion purchase of Nobel Biocare Holding
AG. That’s when Danaher Chief Financial Officer Daniel Comas
suggested it may have as much as $12 billion to spend on deals.
This month the company said it would be comfortable with
about $8 billion in M&A capacity. Kejriwal said he thinks it has
the ability to tackle a target as big as Agilent.
“This is a deal machine,” Kejriwal said. “They have this
capacity and we have not seen that capacity being utilized.
They’ve done some deals this year but nowhere close to what they
could be doing. This would make a lot of sense.”
Thermo Fisher also has the balance sheet to tackle a deal
of this size, and would be a logical suitor, said Couillard of
Jefferies. The $50 billion maker of life-sciences equipment paid
about $13.6 billion to acquire Life Technologies Corp. this
year.
Agilent may prefer to be an acquirer, rather than a target,
according to Michael Waterhouse of Morningstar Inc. If the
company lowers costs, improves profit margins and makes better
use of its balance sheet, a sale “doesn’t have to be in the
discussion,” Muken of ISI said.
Even so, the steps the company has taken to unlock
shareholder value have also made it a more attractive target.
“They’ve really been trying to reshape the portfolio such
that maybe it looks a little cleaner for potential acquirers as
well,” Howard of Saturna Capital said.
For Related News and Information:
Agilent Technologies to Split Into Two Public Companies
Danaher Investors Look for Deals as $12 Billion Idles: Real M&A
Spinoffs Tee Up Next Mergers as Breakups Beget Deals: Real M&A
Agilent M&A news: A US <EQUITY> TCNI MNA <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2014-12-18 00:00:00.7 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Brooke Sutherland
(Bloomberg) -- Agilent Technologies Inc. may finally be the
right size for a takeover.
The $13 billion company completed the spinoff of its
electronic measurement business last month, the latest in a
series of moves to slim down since its separation from Hewlett-
Packard Co. about 15 years ago. Now, its narrowed focus on
faster-growing biological and chemical testing tools and its
strong emerging-markets presence could attract interest.
Agilent’s position in the market for tools that analyze
chemical mixtures is difficult to replicate and competitors that
want to be in the industry would be better off buying their way
in, said BTIG LLC. Danaher Corp., the $59 billion conglomerate
with billions to spend on acquisitions, could fill gaps in its
portfolio with an Agilent takeover, said FBR & Co. Thermo Fisher
Scientific Inc. is another potential suitor, according to
Jefferies LLC.
“With the two businesses split, the new Agilent becomes a
much cleaner potential acquisition target for a larger player in
the life-sciences space,” Brandon Couillard, a New York-based
analyst at Jefferies, said in a phone interview. “It’s one of
the most attractive businesses in the sector.”
Healthy Premium
Agilent may command about $48 a share, a 21 percent premium
to its closing price yesterday, based on similar deals, said
Tyler Howard, an analyst at Bellingham, Washington-based Saturna
Capital Corp., which oversees about $4 billion, including
Agilent shares. Ross Muken, a New York-based analyst at Evercore
ISI, estimates a price tag in the same range. He puts Agilent’s
fair value at $45 to $50 a share, and said any buyer would
probably have to pay a premium to that.
Representatives for Santa Clara, California-based Agilent
and Waltham, Massachusetts-based Thermo Fisher declined to
comment. A representative for Washington, D.C.-based Danaher
didn’t respond to a request for comment.
Since its split from Hewlett-Packard, Agilent has sold off
$6 billion in assets and completed two spinoffs of its own. That
includes this year’s initial public offering of its electronic
measurement business, Keysight Technologies Inc., which left
Agilent focused on life-science technology.
“One of the big issues with the combined company was there
was a lack of focus and they’d be better off separate -- well
now they are,” Michael Cuggino, president and fund manager at
Permanent Portfolio Family of Funds Inc. said in a phone
interview. “That makes them attractive as bolt-on acquisitions
to firms trying to gain share or to supplement existing business
lines.”
Cuggino helps oversee about $7 billion, including shares of
both Agilent and Keysight.
Market Leader
Agilent has a leading position in the market for liquid and
gas chromatography mass spectrometry tools, which are used to
analyze complex chemical mixtures for industries such as drug
research and food safety testing, said Dane Leone, a New York-
based analyst at BTIG. That’s a hard market to penetrate as a
new entrant, he said.
“Generally, buying someone with that pre-existing market
position is a better strategy,” Leone said.
That would be a motive for Danaher, which doesn’t have a
strong position in that area, said Ajay Kejriwal, a New York-
based analyst at FBR. The conglomerate could also cut costs and
improve profitability at Agilent by incorporating the company
into its management system, he said.
‘Deal Machine’
Danaher, the maker of everything from dental equipment to
water filters, has spent about $3 billion on takeovers since
May, including the $2 billion purchase of Nobel Biocare Holding
AG. That’s when Danaher Chief Financial Officer Daniel Comas
suggested it may have as much as $12 billion to spend on deals.
This month the company said it would be comfortable with
about $8 billion in M&A capacity. Kejriwal said he thinks it has
the ability to tackle a target as big as Agilent.
“This is a deal machine,” Kejriwal said. “They have this
capacity and we have not seen that capacity being utilized.
They’ve done some deals this year but nowhere close to what they
could be doing. This would make a lot of sense.”
Thermo Fisher also has the balance sheet to tackle a deal
of this size, and would be a logical suitor, said Couillard of
Jefferies. The $50 billion maker of life-sciences equipment paid
about $13.6 billion to acquire Life Technologies Corp. this
year.
Agilent may prefer to be an acquirer, rather than a target,
according to Michael Waterhouse of Morningstar Inc. If the
company lowers costs, improves profit margins and makes better
use of its balance sheet, a sale “doesn’t have to be in the
discussion,” Muken of ISI said.
Even so, the steps the company has taken to unlock
shareholder value have also made it a more attractive target.
“They’ve really been trying to reshape the portfolio such
that maybe it looks a little cleaner for potential acquirers as
well,” Howard of Saturna Capital said.
For Related News and Information:
Agilent Technologies to Split Into Two Public Companies
Danaher Investors Look for Deals as $12 Billion Idles: Real M&A
Spinoffs Tee Up Next Mergers as Breakups Beget Deals: Real M&A
Agilent M&A news: A US <EQUITY> TCNI MNA <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman