PerkinElmer is slimming down to focus solely on diagnostics and life sciences research, selling off its other businesses in a deal that will hand it $2.3 billion in cash. The funding is expected to allow the company to redouble its efforts in healthcare and attain a new name.
Through a sale to private equity firm New Mountain Capital, PerkinElmer is divesting its food safety, environmental testing and industrial quality assurance divisions, including its chromatography and mass spectrometry hardware made for use in forensics, semiconductor manufacturing, chemical production and more.
The transaction is slated to close in the first quarter of 2023, according to a press release. The deal also includes a provision for an extra $150 million payment depending on how much money New Mountain can get by flipping the businesses to another bidder.
If completed, New Mountain’s newly acquired applied science, food and enterprise services holdings—together expected to produce about $1.3 billion in 2022 revenue—will retain the PerkinElmer brand. That leaves the company’s current leadership, who will remain with the life sciences and diagnostics divisions, to come up with a fresh moniker and stock ticker.
Accounting for around 11,000 of its roughly 17,000 employee workforce, PerkinElmer’s healthcare, diagnostic and biopharma-focused operations are slated to generate about $3.3 billion revenue by the end of this year—and the company has set its sights on 10% annual growth in the future, with a large portion driven by recurring sales of research consumables such as dyes and reagents.
Last year, PerkinElmer put down $5.25 billion for its largest acquisition ever. It bought BioLegend, a global producer of antibodies and supplies used in the development of precision diagnostics and large- and small-molecule drugs as well as cell and gene therapies.
PerkinElmer also received a boost in 2021 driven by demand for COVID-19 tests, including an increase of about $750 million in immunodiagnostics revenue compared to the year before, according to the company’s annual report (PDF).
However, like most diagnostics providers this year, PerkinElmer has since seen declines in COVID test sales. This past April, the company informed 75 employees in California that they would be laid off following the termination of the state’s $1.7 billion contract, which included a facility capable of running up to 150,000 tests per day (though it never reached that level).
PerkinElmer released its most recent earnings report this week, detailing second-quarter sales of $1.23 billion—the same amount it posted for the same three-month period in 2021. The company said the 8% organic growth it saw in non-COVID products was canceled out by declines in diagnostics revenues, which amounted to $569 million compared to $716 million last year, or about a 20% drop.
For the remainder of 2022, it very slightly raised its total revenue forecasts for the entirety of its businesses. The company now expects to land between $4.6 billion and $4.64 billion, up from its first-quarter estimate of between $4.56 billion and $4.63 billion.
"Following the close of the transaction, we will be a pure-play, high growth, high margin life sciences and diagnostics company with unique scale,” President and CEO Prahlad Singh said in the press release. “Today's announcement is a pivotal step in the significant portfolio transformation we have been executing on over the last several years.”
The influx of cash will help support “accelerated investment into attractive end markets across science and disease,” Singh added.