One entity will focus on life sciences, diagnostics and applied markets (LDA), and retain the Agilent name while the other will consist of Agilent’s range of electronic measurement (EM) products. The separation is expected to occur through a tax-free spinoff of the measurement business to Agilent shareholders, the Santa Clara, Calif.-based firm said in a formal statement.
“Agilent has evolved into two distinct investment and business opportunities, and we are creating two separate and strategically focused enterprises to allow each to maximize its growth and success,” President/CEO William (Bill) Sullivan said. “Agilent’s history is one of reinvention, starting with our own separation from HP and including four major spinoffs since 2005. We are once again making a bold move, as we have done many times in the past, to ensure a future of sustainable growth for both the LDA and EM companies. We are focused on making this transition seamless for our customers.”
Agilent executives claim the separation will benefit the standalone companies by:
- Providing greater management focus on the distinct businesses of LDA and EM;
- Allowing the LDA company to devote resources to the higher-growth LDA business, while reducing exposure to the more cyclical EM industry;
- Enabling the EM company to devote resources to its own growth that were previously used to capitalize LDA;
- Creating two independent and unique investment profiles; and
- Ensuring that both companies are well capitalized, have strong balance sheets and investment-grade profiles with target debt-to-EBITDA ratios below 2.0x.
“Agilent’s history is one of reinvention,” Sullivan told analysts in a conference call. “We are once again making a move to ensure a future of sustainable growth.”
Each business is strong enough financially to compete on its own. Sullivan does not expect any major acquisitions or divestitures.
Sullivan will remain president/CEO of Agilent, and Didier Hirsch will continue as chief financial officer (CFO).
Ron Nersesian, who has served as Agilent’s president and chief operating officer, will now be executive vice president of Agilent and president and CEO-designate of the new EM company, effective immediately. Neil Dougherty, who has been Agilent’s vice president and treasurer, will become vice president of Agilent and CFO-designate of the new EM company.
“The board and I believe Ron is the right leader for the new company,” Sullivan said. “He has an excellent track record of running this business, and he has the vision and expertise to position the new company for accelerated growth and success.”
Under the board-approved separation plan, Agilent shareholders will receive a pro rata distribution of shares in the new EM company through a tax-free spinoff. Although there is no assurance that the separation will be completed within this timeframe, the transaction is targeted to be completed by the end of calendar 2014, subject to the satisfaction of closing conditions, including, among others, obtaining final approval from the Agilent board of directors, satisfactory completion of financing, receipt of tax opinions, receipt of favorable rulings from the Internal Revenue Service, the effectiveness of a Form 10 filing with the Securities and Exchange Commission, and satisfying foreign regulatory requirements.
The spinoff will not impact Agilent’s guidance for fiscal year 2013. The company is expected to incur one-time charges related to the transaction during the periods preceding the separation, to be quantified at a later date.