Danaher (Washington) said Wednesday it has agreed to acquire both halves of a mass spectrometry joint venture in two separate deals for a combined total of $1.1 billion.

In one transaction, Danaher has agreed to pay $650 million for the Analytical Technologies division of MDS (Toronto), which includes a 50% ownership position in Applied Biosystems/MDS Sciex joint venture (AB Sciex; Concord, Ontario), a mass spectrometry business, and a 100% ownership position in the former Molecular Devices Corporation, a bioresearch and analytical instrumentation company. In a separate but related transaction, Danaher also agreed to buy the remaining 50% ownership position in AB Sciex from Life Technologies (Carlsbad, California) for $450 million in cash. The purchase price for the combined transactions is $1.1 billion, including debt assumed and net of cash acquired, Danaher said.

Life Technologies was formed by the merger of Invitrogen (Carlsbad, California) and Applied Biosystems (Foster City, California) last year (Medical Device Daily, Nov. 25, 2008).

"We're obviously very excited about this opportunity for several reasons," Larry Culp, Danaher's president/CEO, told listeners during an investor conference call. First, we believe we are acquiring two outstanding businesses with great brands and technological leadership, which are well positioned in attractive markets that they serve."

AB Sciex, operated as a joint venture between Life Technologies and MDS, makes mass spectrometers, highly sensitive and sophisticated instruments used by researchers and clinicians to identify and quantify specific molecules in complex samples. AB Sciex sells into the research, applied and clinical markets. Typical applications include proteomics research, drug development, food and environmental safety testing, and diagnostic testing, the company noted. Molecular Devices supplies bio-analytical instrumentation systems and consumables designed to accelerate and improve research productivity and effectiveness in life science research and drug discovery.

According to Culp, AB Sciex is the "premier brand" in the $2 billion mass spectrometry market.

"The second reason we're excited about acquiring these businesses is they represent a tremendous strategic addition to our med-tech segment and to the company as a whole," Culp said.

Danaher said the acquired businesses will operate with its Medical technologies segment, joining its Leica, Radiometer, Sybron, and KaVo businesses, and will expand the segment's annual revenues by more than $650 million. The acquired businesses will increase Danaher's life sciences and diagnostics annual revenues to more than $2 billion, the company said.

"The third and final reason we're excited this morning about acquiring these businesses is that we believe they offer an attractive value creation opportunity," Culp said. "Similar to Leica, AB Sciex and Molecular Devices are both high gross margin businesses, which have been impacted by complicated ownership structures. Danaher can offer a single, cohesive ownership structure that will help to focus business strategy with an emphasis on innovation to drive long-term growth."

During a separate investor conference call Wednesday, Greg Lucier, CEO and chairman of Life Technologies also told listeners that the mass spectrometry business would benefit from a single ownership structure.

"While a joint venture was once the right structure to combine corporate capabilities and launch this business, it is no longer the best approach to win in a more mature, competitive, mass-spec industry," Lucier said. "We believe one entity needs to control the entire value chain from R&D to manufacturing to sales and service. In purchasing both halves of the joint venture, Danaher will be able to achieve just that."

Danaher said the transaction with MDS is subject to approval of the MDS shareholders. Both deals are subject to regulatory approval and customary closing conditions, including the absence of material adverse change with respect to the acquired businesses. The companies expect the transactions to close in 4Q09.

"We believe AB Sciex and Molecular Devices will provide a solid foundation for continued growth both internally as well as through inorganic expansion into related markets and applications," Culp said.

Life Technologies said it does not expect the sale of its mass spectrometry business to affect its previously disclosed full year 2009 earnings expectations. In addition, the company reiterated its synergy targets for the Invitrogen and Applied Biosystems merger of $95 million in 2009 and $175 million by 2011.

"I'm sure news of this divestiture is not surprising to many of our investors given our focus on biological reagents and the associated instruments that consume those reagents," Lucier said. "Mass spectrometry systems just don't have that consumable trail. For Life Technologies, this sale gives us the ability to focus on what we do best: develop biological reagents, and the associated instrument solutions that leverage our extensive understanding of DNA, RNA, proteins and cells to advance life sciences."

Lucier said Life Technologies expects available proceeds net related expenses and taxes to be about $290 million, all of which the company intends to put toward the repayment of its debt, which will reduce interest expenses by about $1 million a month, depending on the type of debt repaid. Also, he added, the company plans to make additional debt repayments this year.

"We are confident the transition of the mass spectrometry business to Danaher will go smoothly, as we plan to use the same rigor and process in this divestiture that we've been using for the Invitrogen and Applied Biosystems merger," Mark Stevenson, president/COO of Life Technologies, said in a company statement. "The same team that has handled the merger integration process will handle this divestiture."

Amanda Pedersen, 229-471-4212; amanda.pedersen@ahcmedia.com