Last Updated on September 30, 2023 by Robert C. Hoopes
Danaher, a global science and technology company, has announced plans to spin off its environmental-and-applied solutions segment into a separate company called Veralto. This move will allow Veralto to focus specifically on water quality, presenting a promising opportunity for growth in this industry.
Shareholders of Danaher can expect strong returns from this spin-off, as the potential value will come from both Danaher stock and shares of Veralto. In fact, the “when-issued” market for both companies suggests that Danaher is currently undervalued, indicating further upside potential after the spin-off.
The spin-off will benefit investors of Danaher in another way as well. For every three shares of Danaher they own, they will receive one share of Veralto. This tax-free maneuver will not only enhance Danaher’s focus on the life-sciences industry but also create additional value for shareholders.
Furthermore, Danaher’s pending acquisition of antibody-and-reagent supplier Abcam is expected to further improve the company’s growth-and-margin profile. This acquisition will enhance Danaher’s position in the life sciences industry and contribute to its overall success.
Under Danaher’s ownership, Veralto’s water quality unit has already demonstrated mid-single-digit organic revenue growth and contributes 60% to its revenue. With such strong performance, Veralto’s margins and cash generation position it for a premium multiple. Analysts project its standalone equity value to be between $95 and $105 per share.
Wall Street analysts also anticipate a positive outlook for Veralto, with a price target of around $90 per share. Their optimism is fueled by Veralto’s focus on water quality and the potential for growth and profitability in this sector.
Danaher’s transformation into a pure-play life sciences firm is happening at a favorable time, as there is increasing demand for solutions in this industry. Additionally, the stock is attractively valued, making it an appealing investment opportunity for shareholders.
Investors have the option to keep both Danaher and Veralto shares or sell for profits if the valuation becomes stretched. This flexibility allows investors to make the most of their investments and capitalize on potential gains.
In conclusion, Danaher’s spin-off of its environmental-and-applied solutions segment into a separate company called Veralto presents a promising opportunity for shareholders. The potential value from both Danaher stock and shares of Veralto, coupled with the projected growth and profitability in Veralto’s water quality unit, make this spin-off an attractive investment option. With the pending acquisition of Abcam and the favorable outlook for Veralto, investors can expect strong returns and potential upside in the coming months.