Food for ThoughtFood for thought:
Carl Bennet’s equity position of 20% in Getinge with a 50.1% voting share control is worth .5 B as of Friday, or down over 60% in past 2 years or so. Bennet and his board have spent 3 years trying to reorganize Getinge leadership and management execution and have nothing but a declining share price and lack of performance to show for their efforts. He, among many Getinge shareholders, must be completely fed up and extremely frustrated with his losses and inability to effectively penetrate the NA market, despite having a star innovative product like the VP4 in their stable.
Fortive obviously wants entry into this sterilization space, as they see significant growth in this industry, and they are willing to (over) pay handsomely for ASP’s installed base and consumables. But, how will Fortive take on Steris, who has been eating ASP’s lunch for 2 years (as ASP’s installed base is not growing proportionately as Steris’s appears to be) without some real innovation to their product line?
What ‘inorganic’ growth prospects do Fortive leaders see here? How about TSO3 and Getinge, both??
I found it fascinating at first blush that Fortive management mentioned only Steris and Cantel in response to an initial analyst question about who were competitors in this low temperature sterilization space. Only in response to a later question that asked for clarification, did management bring up Getinge. Was this avoidance intentional, to keep focus away from expressing any interest in Getinge?
Fortive did not commit to a capital raise to fund their acquisition but stated they will make this decision over the next 9 months before deal closes, indicating an unusually vague stance. Perhaps, there are other pieces to the puzzle that must be in place first?
Fortive has insight, has done industry research, and likes the increasing trend of regulatory bodies to terminal sterilization solutions, as we are seeing from FDA, AAMI, APIC, etc.. They like the space first, then they look for companies to acquire to make FCF and profits happen. Fortive executives say they see underlying opportunities not in just NA but in EU, where ASP has only a minimal footprint. One analyst referenced JNJ had reported that ASP had 60% of an overall market that had declined 5%. But, Fortive sees ASP growth outside advanced EU and US markets, but Getinge is the one who owns the Sterrad imitation cheap knock-off Stericool (that sells for half? the price of a Sterrad) made in Turkey and targeted at growing cash strapped emerging markets. And, this product is NOT FDA approved and will not therefor come for sale in US.
One analyst put forward that “this was the first in a platform move I take it” and asked about further vertical and other broader integration as they grow into this terminal low temperature sterilization field. Fortive management stated they don’t feel a need to be ‘into everything’ in sterilization but they like this untapped growing low temp space and its growth above the rest of the general sterilization space. They indicated to analysts on this cc last week that they are not done with ‘inorganic’ acquisitions in this growing $5 B industry. When the analyst asked if they still saw perhaps $5 B left to allocate out of a previously suggested total of $8 B Fortive wanted to spend (with about $3 B only used for ASP), management agreed with this assessment of the situation.
With this kind of substantial money to still to allocate here ($5 Billion!!!), for Fortive to buy Bennet’s share of Getinge for controlling interest for a premium to market at $.7 - .8 B or the entire company for $3-4 B) and thereby gain dominant and major EU market share to add to their ASP acquisition in US would make a lot of sense. It would simply make sense to acquire ALL outstanding shares of Getinge at a premium to these price levels given the synergies here and the opportunity Fortive sees. As there would be very little overlap of geography or creation of any monopoly in offerings, regulators should see no problem with such an industry consolidation to create a true powerhouse in the low temperature field, and in sterilization in general.
And, a purchase of TSO3 to allow Fortive to completely blow Steris and other competitors out of the water would make perfect sense, as any leader in this industry needs to own the leading technology. Period.
But, I hope we can hold out as an independent company until TOS is over $5 a share minimum!!
Just my humble thoughts.
Something is brewing. :)