Danaher to spin off dental unit, posts earnings beat; shares rise

  • Danaher said it would spin off its dental unit into a publicly traded company.
  • The medical equipment maker is seeking to revitalize a struggling business.
  • The company also reported better-than-expected second-quarter profit.

Danaher said on Thursday it would spin off its dental unit into a publicly traded company, as the medical equipment maker seeks to revitalize a struggling business.

The company's shares rose about 6 percent to $104.86 in premarket trading, after the company also reported better-than-expected second-quarter profit.

The unit, which provides dental tools such as prosthetics, infection prevention products, and implants, has missed analysts' expectations in the past four quarters, according to Thomson Reuters data.

"The Dental business has struggled for several years, delivering low growth, and management has faced questions over its place in the portfolio for some time," Barclays analyst Julian Mitchell said in a note.

Danaher executives also hinted at more opportunity for mergers and acquisitions for the unit, highlighting a "greater focus around both organic and inorganic investment opportunities" as a standalone company.

The unit, which had annual sales of nearly $3 billion in 2017, competes with Dentsply Sirona and 3M.

In 2015, Danaher off its unit, which makes test and measurement products, retail fuel pumps and telematics and automation products, into Fortive Corp.

Thursday's move is similar to the Fortive spin-off, said Evercore ISI analyst Ross Muken, who said that the unit was spun out when it seemed to be underperforming.

The dental unit spinoff will be tax-free to Danaher shareholders and is expected to be completed in the second half of 2019.

Amir Aghdaei, who is currently responsible for the dental business, will become the CEO of the new company, Danaher said.

Revenue rose 10.4 percent to $4.98 billion in the second quarter, above analysts' estimates of $4.92 billion, according to Thomson Reuters I/B/E/S.

Excluding items, the company reported profit of $1.15 per share, above analyst expectations of 95 cents per share.

The company reported annual sales of $18.33 billion for 2017.