Danaher Spin-off (Environmental & Applied Solutions)

September 8, 2023 Update

The Environmental & Applied Solutions spin-off is on track for Q4 2023 according to Danaher’s July 2023 earnings call:

August 13, 2023 Update

Good overview of Veralto SpinCo from RemainCo CEO

May 16, 2023 Update

A good quote from a recent Swiss publication:

“In the fall, Danaher announced that it would spin off its Environmental & Applied Solutions division via the stock exchange. Called EAS for short, it employs around 16,000 people worldwide and offers tools, tests and software for ensuring water quality for utilities and other companies. In 2022, it accounted for 15% of the group’s sales and 13% of its operating profit.
 

The future independent division will be called Veralto and will be listed on the NYSE in New York. At the EBIT level, he earns impressive profit margins of around 23%. Its growth is crisis-resistant, with 55% of sales coming from recurring revenue. However, the rate of expansion across the group is higher.

The spin-off of the division makes strategic sense, especially as there are hardly any synergies with the other divisions and Danaher can henceforth concentrate exclusively on the healthcare sector. With a view to ESG criteria, which are in line with environmental protection, ethics and exemplary corporate governance, the topic of water is also attractive for institutional investors.

In terms of valuation, peer companies like Evoqua Water Technologies and Xylem are trading at 18 to 20 times estimated 2024 Ebitda. UBS research gives Veralto a multiple of 16 to 18, which, after deducting net debt, results in a potential stock market value of around $20 to $23 billion. Danaher itself trades at 18x Estimated 2024 Ebitda.”

September 15, 2022 Update

Danaher (DHR) announced on September 14, 2022 that it will be spinning off its Environmental & Applied Solutions (EAS) segment. The spin is expected to occur in Q4 of 2023. 

The current Danaher segment that will make up EAS mainly focus on water quality and product identification. In 2021 this segment generated $4.7 billion in revenue, with a global team of 16,000 associates. Danaher will remain geared towards health care, environmental and applied end-markets within their Life Sciences and Diagnostics segments. 

Looking at the top line on a segment basis it seems like the EAS has trailed significantly to the other two segments. The Life Sciences segment over the past 6 years has grown 197% with strong tailwinds from the pandemic, doubling the size of the business in 2 years. While not as extreme, the Diagnostics segment grew 83% in 6 years. Within that same time frame, the EAS segment grew just 26%.

Danaher has previously spun off two companies: FTV in 2016, and NVST in 2019. Neither has performed particularly well.