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Danaher Spending $4 Billion on Diagnostics Company

Danaher's announcement of its plans to acquire Cepheid comes months after it spun off some businesses to better focus on healthcare-related offerings. 

Chris Newmarker

Danaher (Washington, DC) said Tuesday that it will spend $4 billion to acquire Cepheid (Sunnyvale, CA), which has built a more than half a billion dollar a year business off a reputation for accurate and easy to use molecular systems and tests. 

The $53 per share price that Danaher quoted marked a 53% premium off Cepheid's closing price on the Nasdaq last Friday, and Cepheid's share price shot up accordingly on Tuesday, closing at $52.53 per share. 

Cepheid's fully automated GeneXpert systems, among other applications, provide test results for the management of infectious diseases. The company expects to bring in $618 to $635 million in revenues in 2016, up from $539 million the previous year. 

Danaher's President and CEO Thomas P. Joyce Jr. described Cepheid as an excellent complement to Danaher's existing $5 billion diagnostics segment, expanding Danaher's ability to grow.

"Cepheid's extensive installed base, test menu and innovative product offering contribute to its market leadership in molecular diagnostics and we expect it to strengthen our position in this high-growth segment," Joyce said. 

Danaher has been increasingly focused on healthcare-related businesses. In July, a new company called Fortive Corp. was created, containing what had been Danaher's test and measurement, industrial technologies, and petroleum businesses. The  life sciences, diagnostics, and dental businesses remained under the Danaher name. 

The $4 billion purchase of Cepheid marks a major acquisition in the medical device space, though dwarfed by the mega deals of past years such as Medtronic's $50 merger with Covidien. A recent report by EP Vantage noted: "The disappearance of the megadeal from the 2016 menu could be because the industry has consolidated as much as possible for now: any more overlap would cause too many antitrust issues to be worthwhile."

Both Danaher and Cepheid's boards have approved the deal, which is expected to close by the end of 2016 pending shareholder approval and customary closing conditions. 

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Chris Newmarker is senior editor of Qmed. Follow him on Twitter at @newmarker.

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[Money image courtesy of Tracy O per Creative Commons license]

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