Landauer’s history, through Fortive’s $770 million takeover – Health Care News

on Sep8

8 September 2017 | 10:30 am

The fate of Landauer as an independent company was sealed late last year when activist investor Jeffrey Strong of Gilead Capital revealed his New York firm had taken a 5 percent stake and was challenging Landauer’s slate of directors. In a letter, he was highly critical of everything from the company’s management to its stock performance and called for “reinvigorating” operations.

In January, Strong got the board seat he wanted, and this week he made Gilead a significant profit on its investment when Landauer, a maker of radiation safety equipment, said it was being acquired for $770 million, including debt, by Fortive of Everett, Wash. (Fortive was spun off a year ago from Danaher and is best known for field instruments and sensing devices employed in a variety of industrial applications.)

The boards of both companies already approved the deal, announced Sept. 6, though Landauer’s stock, which sold for as little as $41 a share last fall, closed above the $67.25 offer price yesterday, suggesting that investors are betting on a higher offer.

But Richard Eastman, an analyst at Robert W. Baird in Milwaukee, says, the “likelihood of another buyer seems remote at this time.” He calls Fortive’s price “on face value quite rich.” He calculates that Landauer is being sold for 18 times this year’s earnings before interest, taxes, depreciation and amortization, though that multiple shrinks to about 13 after certain synergies within corporate overhead are accounted for. “It looks to me that it will be hard for Fortive to get even a 10 percent annual return on its investment anytime in the next five years,” he says.

Landauer controls two-thirds of the market in its main product segments, such as the radiation-measuring devices called dosimeters commonly worn by workers exposed to X-rays in hospitals and labs. Its chief rival is Mirion Techhnologies in Smyrna, Ga., but Mirion is a small firm unlikely to have the resources to bid against Fortive, which had $6.22 billion in sales last year. Executives at Landauer, Fortive and Mirion did not respond to requests for comment. Strong at Gilead could not be reached.

Mike Kaminski, Landauer’s CEO since October 2015, will receive what the company calls a “success bonus” of $1.7 million for seeing the deal through.

Founded by Robert Landauer in a Park Forest basement in 1954, Glenwood-based Landauer projects revenue for the fiscal year ending Sept. 30 at about $150 million, with diluted earnings of between $1.81 and $1.87 a share. Revenue in the first nine months of the year increased almost 4 percent to $116.6 million, while its profit rose 5 percent to $16 million. The company had 600 employees as of a year ago.

GLORY DAYS

A decade ago and more, Landauer was growing much more briskly and had a following on Wall Street among analysts who figured that the company had opportunities in new nuclear power plant construction as well as home radon detection. But neither opportunity materialized, and the stock was stuck for a decade, trading at about $50 in September 2006 and at that same price last September.

J. Bryant Evans, a portfolio manager at Cozad Asset Management in Champaign, was a booster of the stock more than 10 years ago. “I was thinking they would grow through nuclear power expansion, and that never happened,” he recalls. “And I always thought they were a takeover candidate, but then mergers stopped during the 2008 recession and people lost interest in the company. As it turned out, I was a bit early in my call for a takeover.”

Another longtime holder, since departed, was Elliott Schlang, editor at Great Lakes Review, a Cleveland investment newsletter. “I thought they had great growth prospects, but they didn’t pan out,” he says.

In the world of radiation testing, Landauer continues to garner respect today from smaller rivals. “They’re still the big dog in our industry,” says Scott Benjamin, CEO of Dosimetry Badge in Melbourne, Fla., a distributor of competitive products. “When a hospital contract comes up, they are inevitably a strong bidder. We specialize in smaller accounts, like dental clinics, and try to fly under their radar.”

Landauer was represented by law firm Sidley Austin of Chicago.



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