Danaher Corp said on Tuesday it would buy medical diagnostics company Cepheid in a deal valued at $4 billion, including debt, that will strengthen its presence in molecular diagnostics.
Danaher, which develops technology for the dental, life sciences, diagnostics and environmental industries, spun off its industrial division in July to focus on science and technology.
Piper Jaffray analysts said the transaction made strategic sense since Danaher had a large diagnostics business but lacked a strong molecular presence, where Cepheid a market leader.
Sunnyvale, California-based Cepheid develops molecular systems for genetic testing. The technology involves characterizing the individual's genetic make-up to help doctors with diagnosis, prognosis and treatment options.
Cepheid's GeneXpert systems provide test results in up to two hours for various conditions including infectious diseases, sexual health and virology, and can be used in small labs and are easily scalable for use by large hospitals.
Washington, D.C.-based Danaher said it would pay $53 per share in cash, a premium of 54 percent to Cepheid's close of $34.42 on Friday.
Another bidder is unlikely, given that a takeover had been speculated for many years, BTIG analysts said in a client note.
"Fear of dilution in the face of relatively limited diagnostics M&A has dampened investor enthusiasm for small-cap diagnostics stocks over the past several months," they said. GenMark Diagnostics Inc and Oxford Immunotec Global Plc are the next logical takeover candidates, they added.
Cepheid, which is expecting revenue of $618 million-$635 million in 2016, anticipates launching in 2017 its Omni point-of-care (POC) device, which is portable and allows testing to be conducted near to where the patient is receiving care.
Danaher Chief Executive Thomas Joyce, on a call with analysts, said ease-of-use, scalability and the opportunity to shift to POC testing had given Cepheid a differentiated position despite increasing investment in the industry.
The addition of Cepheid will improve operational efficiencies and expand margins in its $5 billion diagnostics unit, the company said.
Danaher, which traces its origins to the Celtic word meaning "swift flowing", has bought more than 400 companies since 1984.
Danaher will focus on smaller bolt-on acquisitions over the next year, Joyce said.
Fenwick & West is Cepheid's legal adviser, and Goldman Sachs its financial adviser.
Cepheid's stock were trading at $52.28 at midday, just shy of the $53 offer price. Danaher's shares were down 1.8 percent at $79.75.
(Reporting by Natalie Grover; additional reporting by Ankur Banerjee; Editing by Ted Kerr and Shounak Dasgupta)