Regular Fool readers will know all about my admiration for multifaceted conglomerate Danaher (NYSE:DHR). And they might also know that the story of Danaher is largely one of ongoing acquisitions.
Well, Danny boy just pulled off a big one Wednesday -- announcing a $2 billion cash tender for dental equipment and supply company SybronDental (NYSE:SYD). Under the terms of the deal, which Sybron supports, shareholders will get $47 in cash for each share -- about a 12% premium.
From Sybron's perspective, I think this is a reasonable deal. The company has a very good franchise, including a top-notch orthodontics business, but growth was seemingly getting harder to come by. And let's be honest, short of some new breakthrough product like a fail-safe decay-prevention treatment, dentistry is likely to be a cash-rich but growth-poor industry. Were I a Sybron shareholder, I think my biggest gripe would be that it's an all-cash deal -- sure, you can take Danaher's cash and go buy shares with it, but you'll have to pay taxes on your Sybron gains.
For Danaher, this is a bit more of a head-scratcher. Oh, this is a fine business -- with good market share in a range of products and consumables like brackets, wires, disposables, endodontics, and so on. But it's paying a pretty rich price for what is already a well-run business. Now, buying good businesses is certainly a good thing, but it does suggest to me that there won't be that "low-hanging fruit" that comes from buying substandard businesses and simply bringing them up to scratch.
I'm also a little puzzled because I don't typically think of Danaher as a big dental consumables company. I tend to think of it more on the equipment side of things -- imaging systems, diagnostic systems, handpieces, and so on. But if Danaher is looking to increase its "mouth share" of the dental market and build on its existing base of contacts and marketing, this certainly makes sense.
All in all, I suspect this deal works out for Danaher. Sure, maybe it's paying a little too much and maybe this puts it more in competition with the likes of 3M (NYSE:MMM), but Danaher has shown before that it can handle competition and integrate acquisitions.
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Fool contributor Stephen Simpson owns shares of 3M, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).
