This morning, Trifecta Stocks model portfolio holding Danaher (DHR) announced that that it has entered into a definitive merger agreement to acquire Pall (PLL) for $127.20 per share in cash, or a total enterprise value of approximately $13.8 billion. Pall closed yesterday at $118.62, up $19.31 on the day as rumors of a proposed deal leaked into the market.
Danaher described Pall as a leading global provider of filtration, separation and purification solutions that remove contaminants or separate substances from a variety of solids, liquids and gases across the broad spectrum of life sciences and industry.
Pall generated revenues of $2.8 billion in fiscal 2014 (ended July) with $1.5 billion coming from its life sciences unit and $1.3 billion from its industrial unit, and 75% of revenue generated from highly visible recurring revenue streams. The life sciences unit addresses the biopharmaceutical, food & beverage and medical end markets, while the industrial unit addresses the process technologies, aerospace and microelectronics markets.
Danaher will apply its "Danaher Business System" to Pall's business to boost new product development and improve operational efficiency. The transaction is expected to close around the end of calendar year 2015 and should be approximately $0.40 accretive to earnings per share in 2016.
In combination with the merger announcement, Danaher announced that it will split itself into two, independent publicly traded companies, in a tax-free transaction. The new companies will be a science and technology company that will assume the Danaher name and an industrial company.
We believe Wall Street will view these actions positively and expect the shares to reflect this favorable reaction.
Danaher Chart and Technicals Are Robust
Both Danaher and Pall shares are higher this morning. The recent move for Danaher above the channel was fierce (yesterday) with very strong turnover. The volume (circled) was enormous and pushed the stock to a resistance line.
It may get past there today, but other indicators show higher prices may be in the near future. The relative strength index (RSI) had a great move up (arrow) while the moving average convergence/divergence (MACD) indicator is on a buy signal confirmed. The %R has expanded and is now overbought and we may see that condition exist for a while longer.
Danaher is a holding in the Trifecta Stocks portfolio co-managed by Brian Ashenberg and Bob Lang.
