Danaher cements commitment to dental with $2.2B Nobel acquisition

A long-anticipated acquisition of Nobel Biocare ($NOBN) is now officially in the works as Danaher ($DHR) said it would acquire the dental company for about $2.2 billion. The deal is expected to make Danaher the market leader in dental equipment and consumables.

Danaher CEO Thomas Patrick Joyce

The acquisition will increase Danaher's dental revenues by more than 35%, bringing them to almost $3 billion, Danaher President and CEO Thomas Patrick Joyce said on a conference call about the deal. About two-thirds of that would be from high-value consumables, he added. Last year, Nobel had about $750 million in revenues with a gross margin of more than 70%.

"Nobel Biocare is a premier brand with a 40-plus-year history as a pioneer and a leader in innovation within the global dental industry," Joyce said. "Nobel Biocare provides tens of thousands of dental professionals around the globe with state-of-the-art, evidence-based, tooth-to-root solutions, helping to improve clinical outcomes and patients' lives."

Danaher expects the dental business will be fast-growing due to an aging population increasingly willing to spend on cosmetic dentistry. But there is a low existing penetration; in the U.S. less than 1% of the population has gotten a dental implant, although more than half have lost at least one tooth.

Joyce also cited Nobel's presence in high-growth markets such as China, Eastern Europe and Latin America as motivating the purchase. These markets generate almost 20% of Nobel's revenue and are key to its revenue growth rate, he said.

Nobel's business is focused on implant dentistry, digital prosthetics and software, which Danaher expects to be complementary to its own dental products in 3D imaging, intraoral scanning and CAD/CAM equipment.

Danaher expects the acquisition will deliver a 10% return on invested capital by 2019. It expects the deal to be accretive to EPS by about $0.05 in 2015 and $0.10 in 2016. It is expected to close by year end or in early 2015. Danaher has already announced $1 billion in acquisitions this year and said its M&A capacity remains at more than $1 billion.

Joyce said he expects to see the Nobel business revenues grow at 3% to 5% annually over the first 5 years, with a bias toward the upper end of that range. Last year, Danaher's dental business grew by 3.6% to $2.1 billion.

Nobel is based in Switzerland, while Danaher is headquartered in Washington, DC. Bloomberg is reporting that the deal is not technically a tax inversion deal like several seen lately including the high-profile Medtronic ($MDT)/Covidien ($COV) merger.

This brings the 2014 total announced acquisition value for health-products companies to $81 billion, Bloomberg noted. Nobel had about 17% of the dental implant market last year, just behind Straumann Holding with 18%; also based in Switzerland, Straumann said in late August that it had looked at Nobel Biocare but it wasn't a fit for strategic reasons, according to Bloomberg.

The CHF 17.10 per share offer is a 23% premium to Nobel's share price before July 28, when acquisition speculation began. Danaher was up about 1% on the news in early trading.

- here is coverage from Bloomberg, Reuters and WSJ (sub. req.)
- and here is the press release

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