Diagnostics company Cepheid (CPHD) was soaring in early trading Tuesday after life-science instrument giant Danaher (DHR) announced an agreement to acquire the company for $4 billion in cash, or $53 per share.
Cepheid, whose GeneXpert system provides rapid automated genetic testing, expects to generate $618 million to $635 million in revenue this year, adding to Danaher’s $5 billion annual revenue base. Danaher expects 5 cents a share of earnings accretion in the first year, rising to 30 cents by year five.
Cepheid shares rose nearly 53% to 52.53 on the stock market today, the highest since September 2015.
Evercore ISI analyst Ross Muken wrote that this deal fits with the larger acquisition strategy of Danaher CEO Thomas Joyce.
“Cepheid is a growth-centric acquisition (could add 50 basis points to organic growth) with high consumable flow (>75%), cementing Tom’s bias as a technology forward CEO,” Muken wrote in a research note. “The asset compliments the company’s existing diagnostics platform and accelerates their entry into molecular markets.”
Needham analyst Mike Matson wrote that an acquisition had been baked into his thesis on Cepheid, with Abbott Laboratories (ABT) being the other likely acquirer. But he says Abbott is too tied up in legal battles over its acquisition of Alere (ALR) to make a counter bid, so he downgraded Cepheid stock to neutral.
Danaher stock was down fell 2.1% to 79.50 Tuesday.
IBD’S TAKE: With a strong Composite Rating of 94, Danaher is a longtime resident of the IBD Big Cap 20 list of large caps with solid growth profiles.
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