Analyst: Danaher Corp. Deal May Fail To Meet Goals

Danaher Corp.

will be hard-pressed to meet goals related to its pending $13.8 billion acquisition of Pall Corp.

, an analyst said Thursday. Deutsche Bank's John G. Inch reiterated a Hold rating and $87 target on Danaher, adding that its additional plan to split into two separately traded companies following the acquisition is based on an unclear strategy. Danaher changed hands recently at $87.96, up $0.61. Shares of the Washington, D.C.-based company are up more than 6 percent since it announced the plans Wednesday. The company expects to save $300 million in synergies over the next five years through its acquisition of Pall, but Inch said Pall's business appears well-run with relatively high margins and little overlap with Danaher. "The target seems aggressive," Inch said of the synergy goal. Moreover, with the Pall acquisition largely financed by commercial paper, Inch said Danaher "appears relatively tapped out on debt capacity." Danaher thus expects to dial back its further acquisitions to "bolt-on" transactions, which Inch said may dissuade so-called momentum investors from buying the stock. The company also said Wednesday it will spin off its industrial products segment into a new company that would have revenue of about $6 billion, based on last year's results. Danaher's $16.5 billion science and technology segment, to include Pall Corp., will retain the Danaher name. "We don't fully comprehend why Danaher is doing this," Inch said. "The rationale for assigning Danaher's segments into each company also appears unclear." Danaher's Chief Executive Thomas P. Joyce Jr. said Wednesday that following the separation, each company will be "more focused, with access to the capital necessary to pursue organic" and acquisitions.