* Buys two life sciences businesses for $1.1 bln
* Sees ‘continuing signs of stabilization’
* Raises job cuts estimate to 3,300
* Danaher shares up 2.6 pct, MDS soars 25 pct (Adds analyst comment, detail on competitors)
NEW YORK, Sept 2 (Reuters) - Diversified U.S. manufacturer Danaher Corp (DHR.N) said it is buying two businesses that make scientific instruments and plans to cut more jobs as it accelerates its restructuring, sending its shares up 2.4 percent in early trading.
Danaher on Wednesday said it would buy the life sciences instrumentation business of Canada’s MDS Inc MDS.TO for $650 million. MDS shares jumped 25 percent.
The MDS unit includes a 50 percent stake in AB SCIEX, a maker of instruments used by researchers and clinicians. Danaher said it would buy the rest of AB SCIEX from Life Technologies Corp (LIFE.O) for $450 million.
The businesses being acquired have double-digit operating profit margins, Danaher Chief Executive Larry Culp said on a conference call.
“We believe we are acquiring two outstanding businesses with great brands and technological leadership, which are well positioned in attractive markets that they serve,” Culp said.
The deals will add about $650 million in annual revenue to Danaher’s medical technologies segment, bringing its sales to $4 billion.
Culp said that with the deals, Danaher’s medical technologies, test and measurement, environmental and product identification platforms will account for three-quarters of company revenue.
AB SCIEX customers include academic and research institutions, pharmaceutical development labs primarily supporting clinical trials, testing and reference labs, and hospitals.
“These companies they’re buying maintain market-leading positions, and I like the end markets, too,” said analyst Guaylon Arnic of Profit Investment Management, which owns Danaher shares.
“They go out and buy businesses that have less cyclicality than other diversified industrials, and they do a great job of morphing those businesses into the Danaher culture. It’s hard to argue with the results.”
As an example, Arnic cited Danaher’s acquisition of Leica Microsystems, a maker of precision microscopes.
“Mass spectrometry is among the most attractive areas in the research technology space, given that spectrometry has become the gold standard in detection analysis,” Deutsche Bank analyst Nigel Coe said in a research note. He said AB SCIEX is No. 1 globally in this market, ahead of Thermo Fisher Scientific Inc (TMO.N), Waters Corp (WAT.N) and Brooks Automation Inc (BRKS.O). PerkinElmer Inc (PKI.N) is also a smaller player.
The deal is a “slight negative” for Waters, Brooks and PerkinElmer, analyst Isaac Ro of Leerink Swan said in a research note. Waters shares were down 1.6 percent, Thermo Fisher lost 2.3 percent, and PerkinElmer fell 1.8 percent. Brooks was up 1.3 percent.
Separately, Washington-based Danaher raised its estimates for job cuts and restructuring costs this year.
It said it now expects restructuring costs of $225 million to $250 million for 2009, up from its prior estimate of $150 million to $170 million. It expects to save about $220 million annually through the restructuring, which also includes closing 30 facilities.
It said it will eliminate 3,300 jobs in 2009, up from a previous forecast of 2,300. It said it was making the added cuts even though it was optimistic about signs of stabilization during the first two months of the third quarter.
“We’re pleased with what we’ve seen the last two months,” Culp said. “But we’re not going to begin to celebrate that we have a hard and fast recovery.”
Danaher shares rose 97 cents to $61.38 in morning trading on the New York Stock Exchange. MDS shares jumped C$1.41 to C$7.83 in Toronto, while Life Technologies rose 25 cents to $44.74 on the Nasdaq.
MDS said it would also seek a buyer for its pharma division, leaving the life-sciences company to narrow its scope to selling medical isotopes used in diagnosing cancer. [ID:nN02528673]
MDS forecast third-quarter revenue of $190 million to $195 million and adjusted EBITDA of $5 million to $10 million from continuing operations, hurt by slumping demand for its products and a prolonged shutdown of a key nuclear reactor that makes medical isotopes. (Reporting by Nick Zieminski in New York, Scott Anderson in Toronto and A.Ananthalakshmi in Bangalore; editing by John Wallace)