Danaher Corp. (NYSE: DHR) says it has signed a definitive agreement with NetScout Systems, Inc. (NASDAQ: NTCT) to merge Danaher's communications test and measurement business with NetScout in a tax-free transaction, to create a global provider of network management tools and security products for carrier and enterprise customers.
Under the terms of the transaction, Danaher shareholders will receive approximately 60% of the issued and outstanding shares of NetScout. At NetScout's closing price of $41.91 on October 10, 2014, the transaction values Danaher's Communications business at $2.6 billion.
Danaher's communications business includes the brands of Tektronix Communications, Fluke Networks, and Arbor Networks. The data cabling tools business and carrier service provider tools business of Fluke Networks is not part of the deal, and will be retained by Danaher.
Danaher's communications business, excluding the excluded Fluke Networks assets, generated approximately $836 million in revenue for their fiscal year ended December 2013, while NetScout generated approximately $397 million in revenue for their fiscal year ended March 2014.
Danaher anticipates that the transaction will result in adjusted diluted net earnings per share of approximately $0.90 and core revenue growth of approximately 3% for the third quarter 2014.
Danaher's president and CEO, Thomas P. Joyce Jr., said, "We are excited about today's announcement, which is the culmination of a multi-year discussion to work together with NetScout. This is a powerful and unique opportunity to combine highly complementary businesses in a transaction that will benefit all Danaher and NetScout stakeholders, including shareholders, customers and associates. We believe the combined company will be able to enjoy strong growth, drive further innovation and serve our customers in a more comprehensive way."
Following the completion of the transaction, James A. Lico, Danaher's executive vice president, will join NetScout's board of directors. In addition, the current NetScout executive team will remain in place at the combined company, including Anil Singhal, NetScout's co-founder, president, CEO and chairman of the board.
Under the terms of the agreement, Danaher will create a wholly owned subsidiary to hold the communications business and will distribute ownership of that subsidiary to Danaher shareholders in either a spin-off or split-off transaction. This move will be followed by a merger of the communications subsidiary with a subsidiary of NetScout. Thus the communications subsidiary will become a wholly owned subsidiary of NetScout.
The transaction is subject to customary closing conditions and shareholder approval. The transaction is expected to close in 2015. Until such time, the communications business will continue to operate separately from NetScout.
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