Agilent commits to Dx with a decision to split in two

Agilent Technologies ($A) is moving ahead with a strategy focused on diagnostics and life sciences, with plans to spin off its electronic measurement products business into a separate company.

Investors loved the news, pushing Agilent's stock up to $51.83 in early trading on Sept. 19, a jump of more than 5%.

The new, revamped, Agilent will keep its name, plus the California company's life sciences, diagnostics and applied markets divisions. Plans call for completing the spinoff by the end of 2014, depending on final board approval, financing, and the satisfaction of foreign regulatory requirements, among other tasks. Agilent's board of directors gave initial approval to the separation plan at its Sept. 18 meeting. William Sullivan, Agilent's president and CEO, said in a statement that plans to split the company in two make sense, considering how its business divisions have evolved.

"Agilent has evolved into two distinct investment and business opportunities, and we are creating two separate and strategically focused enterprises to allow each to maximize its growth of success," he explained.

Agilent has focused on growing its life sciences/diagnostics arm for some time. One of its biggest moves in recent years: snatching up Denmark's Dako for $2.2 billion in 2012, giving it access to a significant and growing cancer diagnostics business, and molecular diagnostics technology in general. Dako has forged partnerships with Pfizer ($PFE), Eli Lilly ($LLY) and Amgen ($AMGN), among others, to develop companion diagnostics tests for cancer drugs. In other words, the companion diagnostics arena is growing fast.

Agilent estimates its revised life sciences focus will generate nearly $4 billion in revenue for fiscal 2013, with new opportunities, in part, in emerging markets, molecular diagnostics and clinical markets. In turn, the as-yet-unnamed electronic measurement products company will continue to focus on communications, aerospace and defense, plus industrial and computer/semiconductor markets. Agilent estimates that arm would produce nearly $3 billion in revenues during the fiscal year.

Sullivan will remain president and CEO of Agilent. Ron Nersesian is the president and CEO-designate of the spinoff company. He had been Agilent's president and chief operating officer, and is an Agilent executive vice president in the interim. In an early step forward, Agilent has also combined its life sciences group with its diagnostics and genomics business. Lars Holmkvist, previously president of Agilent's diagnostics and genomics group, will run the combined operation and also continue as an Agilent senior vice president.

Agilent plans to create two separate companies by issuing a pro rata distribution of shares to Agilent shareholders by way of a tax-free spinoff. Agilent says the spinoff won't affect its guidance for the 2013 fiscal year, though it will face one-time charges relating to the deal.

Agilent's decision to split in two follows similar spinoffs this year at Abbott ($ABT) and Covidien ($COV).

- read Agilent's initial announcement
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