Danaher buys out joint venture partners; MDS plans more sales; Life Technologies wants deals

By Cristal Cody

Tupelo, Miss., Sept. 2 - In what analysts and company executives deemed as one of the more complicated deals of the year, Danaher Corp. said Wednesday it will buy out the joint venture owned by MDS Inc. and Life Technologies Corp. and some other assets for $1.1 billion in cash and debt.

Meanwhile, MDS said it is looking for buyers for its pharma services development division and its central labs business. The sales will leave the company with the remaining Nordion division, a move sharply questioned by analysts on Wednesday.

Also, Life Technologies plans to ramp up its deal activity over the next few months, chairman and chief executive officer Greg Lucier said Wednesday on a conference call with analysts.

Moving over to stocks, Wall Street continued a two-day loss.

The Dow Jones Industrial Average slipped 29.93 points, or 0.32%, to close at 9,280.67.

The Standard & Poor's 500 index fell 3.29 points, or 0.33%, to 994.75, and the Nasdaq Composite index lost 1.82 points, or 0.09%, to end at 1,967.07.

Deals 'in the works'

"Everyone's excited about putting one team in the room and one strategy," Danaher's president and CEO, H. Lawrence Culp Jr., said on a conference call with analysts on Wednesday.

The deal will create a global mass-spectrometry company that produces products for a variety of industries including medical and scientific research.

Danaher will pay MDS $650 million for its interest in the Applied Biosystems/MDS Sciex joint venture and for its bioresearch company, Molecular Devices Corp., and will pay Life Technologies $450 million for its partnership interest.

Daniel Comas, Danaher's chief financial officer, said on the call that the deal is a "little bit complicated. We also think that's part of the opportunity."

Washington-based Danaher, which manufactures industrial and medical products that include tools and microscopes, also said it will eliminate 3,300 positions and 30 facilities as part of its restructuring plan.

Lucier said the sale to Danaher will allow Life Technologies to focus on core assets and future growth.

Life Technologies, a Carlsbad, Calif.-based biotechnology tools company, was created by the $6.7 billion merger of Invitrogen Corp. and Applied Biosystems Inc. in November 2008.

Life Technologies intends to reduce its debt by the end of 2010 and make a "couple of small acquisitions between now and then," Lucier said on a conference call also held Wednesday. "We have other acquisitions in the works as we speak."

Lucier said the company had anticipated this year's sale of the joint venture and other assets.

"It would have been very difficult to sell this business last year," he said. "The business was losing [market] share and hadn't come out with any new products. Since that time, several new products have launched and we've improved the quality. We feel we got the best value and best owner for this joint venture."

Danaher expects the transactions to close in the fourth quarter.

Both deals with MDS and Life Technologies are contingent upon the other closing. The transactions require regulatory clearance and approval from MDS shareholders.

MDS said it plans to hold a special shareholders meeting in October to vote on the deal. The sale must be approved by two-thirds of the votes cast at the meeting.

The deal includes a 4.00% termination fee if MDS' board changes its recommendation on the sale.

MDS said in a later statement on Wednesday that it secured a voting support agreement from two of its largest shareholders.

ValueAct Capital and Enterprise Capital Management Inc., which together own 23.00% of the company's outstanding stock, have agreed to vote their shares in favor of the transaction.

Alastair Mackay, an analyst with Garp Research & Securities Co., told Prospect News on Wednesday that shareholders should approve the deal.

"MDS presumably did not make an acceptable offer to buy it from Life Technologies because everybody had been thinking since the merger that Life Technologies would likely unload this," he said. "So now they are both agreeing to sell to Danaher. It seems to be a reasonably good mix. It's hard to see any advantages to MDS shareholders to nix the deal."

MDS plans to return $400 million to $450 million of the sale proceeds to shareholders through a share buyback and use a portion to retire outstanding debt.

On Wednesday's conference call, Stephen P. DeFalco, MDS' president and CEO, said the transaction is competitive and that the decision followed a strategic review by a special committee of independent directors.

The sale is the "best way to unlock the value of our business units in a reasonable timeframe," he said.

MDS seeks buyers

Mississauga, Ont.-based MDS, which provides equipment and services for medical research and drug production, also plans to sell its pharma services development division and its central labs business to focus on its Nordion division.

The Nordion division supplies medical isotopes for uses that include molecular and diagnostic imaging.

The assets for sale are good businesses, but it's still a "somewhat choppy deal environment," DeFalco said on the call. "We do have a couple of interested parties, and we'll see how that comes together."

Shares of MDS jumped $1.76, or 30.03%, to close at $7.62 on Wednesday.

Danaher shares closed up $1.71, or 2.83%, at $62.13.

Shares of Life Technologies gained 77 cents, or 1.73%, to close at $45.26.

Mentioned in this article:

Danaher Corp. NYSE: DHR

Life Technologies Corp. Nasdaq: LIFE

MDS Inc. NYSE: MDZ

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