Analysts See Trouble In NetScout Systems Inc. Danaher Deal

NetScout Systems Inc. NTCT plunged nearly 11 percent Tuesday in the wake of its plan to acquire a competitor's communications business for $2.6 billion. Danaher Corp. DHR shareholders will receive 62.5 million NetScout shares in exchange for the Danaher unit. NetScout, which provides network management products, expects the deal to close next year. But at least a couple of analysts figure Dahaher shareholders will dump their newly obtained NetScout holdings, dragging down the price. The 62.5 million shares represent 290 days of NetScount's average daily volume. Noble Financial's Mark Jordan cited the potential problem and cut his rating on Westford, Mass.-based NetScout to Sell, from Hold Tuesday, dropping coverage. Danaher investors "may not be a Tech and Service Provider focused group, and could be sellers," Sterne Agee's Alex Kurtz said Tuesday. Danaher makes scientific instruments and dental equipment. NetScout Chief Executive Anil Singhal "would need to take a more active role" if the new shareholders are to be retained, according to Kurtz, who maintained a Neutral rating. "But historically Singhal has been more focused on longer-term strategy." But D.A. Davidson's Mark Kelleher thinks the acquisition will broaden NetScout's market and boost its share value. Kelleher upgraded NetScout to Buy from Neutral, with a $48 target. NetScout fell nearly 11 percent recently to $$34.93 a share.