NetScout To Buy Danaher's Communications Business In $2.6 Bln Deal

(RTTNews) - NetScout Systems, Inc. (NTCT) Monday said it has entered into a definitive agreement to acquire the Communications business of science and technology company Danaher Corp. (DHR) for about $2.6 billion. Upon completion of the merger, Danaher's shareholders will own nearly 59.5 percent of the combined company, and NetScout shareholders will own the remaining stake.

The boards of directors of both the companies have unanimously approved the deal. The transaction is expected be accretive in the first year of combined operation. On a non-GAAP basis, the combined company is expected to generate revenue of over $1.2 billion.

Danaher's Communications business comprises Tektronix Communications, Arbor Networks, and certain parts of Fluke Networks. The data cabling tools business and carrier service provider tools business of Fluke Networks will be excluded from the transaction.

NetScout, a provider of network, application, and service assurance solutions, stated that the acquisition will significantly increase its scale and global presence, and accelerate its entry into Cyber Intelligence market, particularly within the advanced persistent threat area.

As per the terms of deal, which will be structured as a Reverse Morris Trust, or RMT, Danaher shareholders will receive about 62.5 million shares of NetScout common stock, valued at about $2.6 billion, which is based on NetScout's closing price of $41.91 on October 10, 2014.

Using the RMT structure, the transaction is expected to be tax free to both Danaher and NetScout, as well as their respective shareholders. The deal is expected to close in the first half of NetScout's fiscal year 2016.

"This combination represents another important step, and a major milestone, towards accelerating our ability to compete on a larger and more global scale in the broader IT management and Cyber Intelligence space...," said Anil Singhal, co-founder, president and CEO of NetScout.

According to James Lico, executive vice president of Danaher, NetScout's monitoring technology, together with Danaher's cyber security and engineering, will provide solutions in the industry.

Upon closing of the transaction, Lico will join NetScout's board of directors. Singhal will continue to lead NetScout.

Singhal, who currently owns more than 5 percent of NetScout's shares, will vote his shares in favor of the combination.

For the year ended December 31, 2013, Danaher's Communications business generated revenue of about $836 million. It has more than 2,000 employees worldwide.

Separately, Danaher noted that as per the terms of the transaction agreement, it 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 will be followed by a merger of the Communications subsidiary with a subsidiary of NetScout.

Danaher also said it anticipates adjusted net earnings per share of about $0.90 and core revenue growth of around 3 percent for the third quarter of 2014. Analysts currently expect earnings of $0.89 per share for the quarter.

NetScout shares closed Friday's trading at $41.91, down 4.18 percent. Danaher ended at $71.86, down 1.25 percent.