Agilent Technologies (Santa Clara, California) has agreed to pay $52 a share – or, roughly $1.5 billion – to acquire Varian (Palo Alto, California) in an all-cash deal that reflects a premium of roughly 35% to Varian shareholders.
Varian is a supplier of scientific instrumentation and associated consumables for life science and applied market applications. Agilent, a measurement company, said the acquisition would broaden its applications and solutions offerings in life sciences, environmental, and energy and materials. It also expands its product portfolio into atomic and molecular spectroscopy; establishes a "leading position" in nuclear magnetic resonance, imaging and vacuum technologies; and strengthens its consumables portfolio, the company said.
"This acquisition is a major step in Agilent's transformation into a leading bio-analytical measurement company," Bill Sullivan, Agilent's president/CEO said in a prepared statement. "While we continue to be a world leader in electronic measurement, our biggest opportunities for future growth are in bio-analytical measurement."
A spokeswoman for Agilent told Medical Device Daily that the company declined to comment beyond the prepared statement.
Richard Eastman, a senior analyst with Robert W. Baird, said in a research report that Agilent appears "opportunistic" in its timing. He called the price "reasonable" and said that Varian's product lines fit "solidly" into Agilent's portfolio.
Both Agilent's and Varian's boards have unanimously approved the offer.
The deal is expected to be accretive to Agilent earnings on a non-GAAP basis in the first full year following completion, the company noted. The transaction is subject to approval by Varian shareholders and Agilent said it expects the deal to be completed before the end of the calendar year.
Varian had annual revenue of $1 billion in its fiscal year 2008 in a product portfolio that includes lab instrumentation and consumables.
Once the acquisition has been completed, Adrian Dillon, Agilent's executive VP and CFO, will assume responsibility for combining Varian with Agilent's Bio-Analytical Measurement segment consistent with Agilent's operating model, the company said.
"We have the opportunity to create significant value for Agilent shareholders by leveraging the combined entity's infrastructure and global supply chain," Dillon said.
Agilent said it expects the deal to generate $75 million in annual cost synergies and achieve Agilent's 20% return on investment capital target within four to five years.
Eastman noted in his report that "our back-of-the-envelope math suggests +$0.05-$0.10 EPS (proforma) accretion to Agilent in the first full 12 months of ownership."
"A competitive bid cannot be ruled out; however, both board's have approved the transaction and we note [Varian] has been 'available' for some time," he wrote.
"For more than 60 years, Varian has built rich talent, technology, products and relationships in this area. The combination of Varian with Agilent's bio-analytical measurement business will result in the broadest product offering in the industry. The acquisition will establish Agilent as a clear market leader in analytical solutions and give us the talent and technology base for creating unique new products and markets," Sullivan said.
Agilent's CEO/Chairman Garry Rogerson said in the same company statement that the transaction delivers "excellent value" for the company's shareholders. "We also anticipate that the combination will yield strong benefits for our customers and employees. Like Agilent, Varian has a long history as a technology leader. We each bring expertise and experience across a different but complementary set of markets and applications. For instance, while Agilent is a leader in food safety, Varian is well established in the energy industry, and has a broad spectrum of products for environmental analysis. Together, the combined company will be able to provide customers with the most comprehensive set of solutions across a wider range of industries."
Agilent says its bio-analytical measurement business provides application-focused solutions that include instruments, software, consumables and services that enable customers to identify, quantify and analyze the physical and biological properties of substances and products.
Varian provides instruments, vacuum products, laboratory consumable supplies, software, training and support through its global distribution and support systems. It employs about 3,600 people worldwide and operates manufacturing facilities in North America, Europe and Asia Pacific. Agilent employs about 19,000.