General Electric’s (GE) stock jumped around 15% in premarket hours on Monday after the company announced the sale of its BioPharma business to Danaher Corporation (DHR) for $21.4 billion. Danaher is expected to pay $21 billion in cash as well as assume certain pension liabilities from GE.
The transaction is expected to close in the fourth quarter of 2019. GE plans to use the proceeds from the sale to reduce leverage and strengthen its balance sheet.
GE’s Chairman and CEO H. Lawrence Culp, Jr. said, “A more focused portfolio is the right structure for GE, and we have many options for maximizing shareholder value along the way.”
GE’s BioPharma business will be included within Danaher’s Life Sciences segment as a standalone entity. Danaher anticipates this business will deliver revenues of about $3.2 billion in 2019, with around 75% of these revenues considered recurring.
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Danaher plans to finance the deal through cash on hand, issuance of debt or credit facilities as well as around $3 billion of proceeds from an equity offering. The company expects the acquisition to reduce GAAP EPS by approx. $1.15 to $1.20 but be accretive to non-GAAP EPS by approx. $0.45 to $0.50 in the first full year post acquisition.
The BioPharma business, which is part of the GE Life Sciences division, delivered revenues of around $3 billion in 2018. The company’s Pharmaceutical Diagnostics business, also a part of GE Life Sciences, will remain within the GE Healthcare portfolio. The GE Healthcare business, excluding BioPharma, generated about $17 billion of revenue with mid-teens operating profit margins last year.
Danaher’s stock gained 8.8% in premarket hours.