Recently, the Federal Trade Commission (FTC) has approved the purchase of General Electric's (NYSE: GE) bio-pharma division by Danaher Corp. (NYSE: DHR). The deal will cost Danaher $21.4 billion. Danaher is an international conglomerate based in Washington DC. that provides products and services for professional, commercial, industrial, and medical use.
This deal has been in the works for months now. It received approval from the EU in December, and South Korean's anti-trust watchdog ok'd the deal in February provided that Danaher seal off some of their assets.
The FTC has included a similar provision in its approval of the deal. In order to avoid violations of anti-trust laws, Danaher must sell off 10 of its products: micro-carrier beads, five chromatography products, and a filtration system used in cell growth. These products will be sold to German-based Sartorius AG (OTC: SARTF), an international supplier of laboratory and pharmaceutical equipment.
Sartorius is a Danaher competitor and the current leader in the field of supplying bioprocessing tools and equipment. Danaher hopes their purchase of GE's biopharma division will help them compete.
"The value from this transaction will fortify our considerable sources to de-risk our balance sheet and continue to solidify our financial position," GE CEO Lawrence Culp said in a statement.
Danaher was in a strong economic position at the beginning of 2020. Adjusted earnings per share for the coming year are forecasted to reach $4.80-$4.90 compared to 2019's reported $4.42. Tempering these gains was a 4.5% increase in the cost of sales year-over-year in the fourth quarter of 2019.
This isn't the only acquisition Danaher has made recently. Danaher acquired DNA Technologies and Blue Software in mid-2018 and Labcyte Corporation in early 2019. Sales growth was increased by 1% in 2019 thanks to these acquired assets. In addition to Danaher's acquisitions, the company also divested from its dental business in 2019 in an effort to boost shareholder value.
GE, on the other hand, saw a year-over-year decline of 1.9% in consolidated revenues in 2019. Unlike Danaher, GE has been experiencing a drop in the cost of sales of 7.3% year-over-year. The sell-off of GE's bio-pharma division seems to be the next step in their plan to focus on aviation, power, and renewable energy announced in mid-2018. Also in keeping with this plan, in the first quarter of 2019, GE sold its transportation business to Wabtec Corporation.
The deal between GE and Danaher is expected to be closed on March 31.