PerkinElmer Inc agreed to sell three of its businesses to private equity firm New Mountain Capital for up to $2.45 billion in cash, as it looks to focus on its life sciences and diagnostics businesses under a new name.
The latest deal is among a wave of recent corporate carve-outs and spinoffs. Last week, 3M Co announced it would spin off its healthcare unit, while Labcorp agreed to separate its clinical development business.
Direct lenders led by Owl Rock Capital Corp helped finance the deal entirely, amid a slowdown in the business of acquisition financing as both traditional and direct lenders have pulled back from lending on leveraged buyouts in recent weeks.
Proceeds from the divestiture will be used to invest in growth in the life sciences and diagnostics segments and to fund future acquisitions, PerkinElmer said. Diagnostics will generate around 60% of the company’s 2022 estimated revenue of $3.3 billion, while life sciences will account for the remainder.
The sale marked the conclusion of a strategic review where other options, including a spinoff of the units, were also considered, according to a source familiar with the matter.
The sale process included both strategic and private equity suitors, the source said, requesting anonymity as these discussions were confidential.
The price tag of the three units – applied, food, and enterprise services – implies a valuation of about 14 to 16 times the company’s 2022 estimated EBITDA (earnings before interest taxes depreciation and amortization), the source said.
The transaction is expected to close in the first quarter of 2023, subject to regulatory approvals.
PerkinElmer will receive $2.3 billion when the deal closes, while the remaining $150 million will be paid to the company later, contingent on the businesses reaching certain return milestones under New Mountain’s ownership.
The divested businesses will continue to use the PerkinElmer brand, while the life sciences and diagnostics businesses that remain will be run by the existing management under a new name and stock ticker that will be announced later, PerkinElmer said.
“The divestiture on (the) surface improves the growth profile of the company,” Evercore analyst Vijay Kumar said in a note.
Goldman Sachs advised PerkinElmer on the deal, while Jefferies advised New Mountain Capital.
