M&A flurry continues with $21bn Danaher bid for GE unit

GE Healthcare was supposed to be heading for an initial public offering (IPO) this year, but that looks less likely after a $21.4 billion buyout offer for its biopharma unit from medtech company Danaher.

The business, which makes equipment for researching, developing and manufacturing biopharmaceuticals and had revenues of around $3 billion last year, will now operate as a separate division within Danaher’s $6.5 billion life sciences division after the closure of the deal.

It’s expected to close sometime in the fourth quarter, with any IPO for the remaining health assets not likely to occur until afterwards. The biopharma business accounted for 15% of GE’s healthcare business revenue in 2018.

The transaction is the first big play by new GE CEO Lawrence Culp in a turnaround plan aimed at alleviating the conglomerate’s crippling level of debt, and a run of poor quarterly results held back by its troubled power division.

Biopharma is the latest divestment of a non-core business, following healthcare equipment finance and lighting operations, and it’s no surprise that it is being sold to Danaher as it is Culp’s former employer – he was CEO of the firm for 13 years.

Culp told CNBC that while an IPO for the healthcare business was plan A, “this is clearly a superior path,” as it gives the company a quick route to paying down debt. It also allows it to offload a chunk of its fairly substantial pension liabilities.

For Danaher, it provides a big increase in this category of the healthcare market, which is the fastest-growing market for the company and will now become a near-$10 billion revenue category. Meanwhile, GE keeps a large proportion of its health assets including the profitable imaging and diagnostics business, which is an important contributor to cash flow.

“GE Biopharma is renowned for providing best-in-class bioprocessing technologies and solutions,” said Danaher CEO Tom Joyce.

“This acquisition will bring a talented and passionate team as well as a highly innovative, industry-leading product suite to our life sciences portfolio, providing an excellent complement to our current biologics workflow solutions.”

Investors in both companies seemed pretty pleased with the deal, with GE shares rising 15% and Danaher up around 8%.

The GE/Danaher deal comes as 2019 continues to deliver on its promise of plentiful biopharma FDA, coming on the same day as Roche’s $4.8 billion acquisition of gene therapy specialist Spark Therapeutics and Ipsen’s $1.3 billion takeover of rare disease player Clementia Pharma.