Top global medical device company to split and go public

Danaher's dental business will be spun off and listed separately,with revenue of 19 billion yuan in 2018.

Giant Split

According to a report by PR Newswire,On June 27, Danaher announced that it would spin off its dental business to form an independent company, "Envista," and plans to apply for an IPO on the NYSE in the second half of 2019, with the stock code NVST. According to reports, Envista will employ 12,000 people worldwide.

"Danaher announced plans to spin off its dental business into a separate publicly traded company."

Source:CISION PR Newswire website

Envista is composed of three companies from Danaher's dental business: Nobel Biocare Systems, KaVo Kerr, and Ormco. These companies hold important positions in Danaher's dental implants, orthodontics, dental equipment, and consumables, owning Brands such as Nobel Biocare, KaVo, Kerr, and i-CAT.

Currently,Aghdaei serves as the Danaher Group's executive officer responsible for the dental sector and will become the President and CEO of Envista in the future.

Aghdaei stated: "Envista's operating model will be built on the foundation of Danaher Dental's business system, constantly shaping and strengthening four core values: better choices and outcomes, trust-based relationships, action-oriented innovation, and continuous improvement as a strength."

Danaher's business has four major segments: dental, life sciences, diagnostics, and environmental and applied solutions, accounting for the following proportions of total revenue respectively:14%, 33%, 31%, and 22%. In 2018, Danaher's total revenue was approximately $19.9 billion, with the dental segment contributing approximately $2.8 billion, equivalent to approximately 19 billion yuan.

Currently, Danaher ranks second globally in the dental industry in terms of revenue, second only to Dentsply Sirona, and far exceeding the third-rankedAlign Tech.

In fact, Danaher initially started as an investment company, and thanks to its incredibly strong acquisition and integration capabilities, it has now grown into a formidable medical giant.

Peng Yang, President of Danaher China and North Asia, once mentioned in a media interview that from1986 to the end of 2014, Danaher acquired more than 400 companies, with company turnover increasing from $300 million in 1986 to nearly $20 billion today.

It is understood thatin 2017, Danaher's revenue reached $18.3 billion, ranking 144th on the Fortune 500 list in the United States, and third in the global medical diagnostics industry.

Split may stem from crisis

Amir Aghdaei, the future president of Envista, did not reveal the reasons behind Danaher's spin-off of its dental business; however, in recent years, spin-offs seem to have become a "trend" in the development of medical giants. From the spin-off experiences of other companies, we may be able to gain some insight.

On June 26, 2018, financial media outlets were abuzz because GE announced through an internal email that it would spin off its healthcare division into an independent company.

In 2017, GE Healthcare's sales reached $19 billion, accounting for 16% of GE's total revenue and being the fourth-largest business unit within the group. According to GE's plan, the independent spin-off of GE Healthcare would be gradually completed within 12 to 18 months.

However, now the resistance to the split is increasing. This yearon February 25, GE sold its Life Sciences biopharmaceutical business to Danaher for $21.4 billion, impacting the plan to split the healthcare business. GE stated that it is reevaluating the plan.

However, fromGE's situation at the time, the split was more like "self-rescue."

In April 2018, there were reports that GE sold part of its healthcare business for $1.05 billion to streamline its business and seek a way out of its deep downturn. In June 2018, S&P Dow Jones Indices announced that GE would be removed from the Dow Jones Industrial Average. In the two years prior, GE's share price had plummeted by nearly 60%.

Regarding the splitof GE's healthcare business, former GE Chairman and CEO John Flannery pointed out that GE would aim for a more streamlined and stronger structure, accelerating growth in various business areas.

Kieran Murphy, President and CEO of GE Healthcare, also stated in the email: "As an independent company, we will have more freedom to invest and reform, have a stronger ability to pursue future growth opportunities, and be able to respond more keenly within the healthcare industry."

GE's crisis, to some extent, reflects the crisis of traditional large, diversified companies. They all hope to simplify the size and functions of their headquarters and enhance the autonomy of their business units. In addition to the independent healthcare business, GE also spun off its oil and gas business and divested its distributed power generation business, aiming to focus on its three core businesses of aviation, power generation, and renewable energy.

Danaher also faces a crisis.

The spin-off of the dental business was not a sudden event. As early asJuly 2018, Danaher announced that it would make its dental business an independent company. Although Danaher's dental business ranks second globally, what is worrying is that Danaher's 2017 dental business revenue growth rate was only 0.9%, far lower than its peers.

Industry insiders have analyzed thatthe purpose of these giants' spin-offs is not the spin-off itself, but to strengthen the independence and competitiveness of their individual business units, which is becoming increasingly important in today's rapidly changing business world.

High-end medical device giants seem to have realized this.In 2016, Philips spun off its lighting business and listed it independently, focusing on its healthcare business; in 2018, Siemens Healthineers completed its spin-off and independent listing, raising $5.2 billion, setting a record for IPOs in Europe in recent years.

In addition, Siemens Healthineers also made significant adjustments to its business structure. It reorganized from the original six major segments into four major segments: image diagnostics, ultrasound, advanced therapy, and diagnostics.

SiemensCEO Roland Busch once analyzed for the media that most of Siemens' businesses are competing with rapidly developing specialized companies in a particular industry, rather than competing with large corporate groups. Therefore, he hopes that Siemens can focus like its competitors, which requires giving these businesses greater autonomy to develop, focusing on their areas of expertise and being as flexible as their competitors.