Nobel Biocare to join Danaher Dental Platform

September 18, 2014

Danaher Corporation announced today that it has entered into a definitive transaction agreement to acquire Nobel Biocare Holding AG, the world leader in implant dentistry.

Danaher Corporation announced today that it has entered into a definitive transaction agreement to acquire Nobel Biocare Holding AG, the world leader in implant dentistry.

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Over the past 40 years, Nobel Biocare has established itself as a pioneer in nearly every aspect of implant dentistry - from PI Brânemark’s discovery of osseointegration, to Procera digital prosthetic solutions and treating fully edentulous patients. In doing so, Nobel Biocare has dramatically changed the lives of millions of patients. Implants and prosthetics are one of the most exciting categories in dentistry today, offering a unique opportunity for dental professionals to deliver long-term solutions to women and men who desire a smile that is both beautiful and functional. With the ways in which technology and materials science continue to shape the implant dentistry workflow, bringing Nobel Biocare to the dental platform upholds Danaher’s commitment to be a world leader in dentistry.

Nobel Biocare will be a cornerstone of the dental platform. With the addition of Nobel Biocare, Danaher will be the strongest consumable and equipment player in the dental industry, with sales approaching $3 billion. Dental implants is a $3.5 billion market with attractive long term growth drivers, including an aging population, growing income in high growth markets and low penetration rates of dental implants in most geographies today. With this acquisition, Danaher will have an unmatched position in dental implants with Nobel Biocare in the premium segment and the Implant Direct joint venture in the value segment; the company plans to further invest in both these segments. Nobel Biocare will operate as a stand-alone company within Danaher’s dental platform, maintaining its own brand and identity. Implant Direct will remain as a standalonejoint venture with no change in its go to market strategy.

“We will continue to invest in a wide range of dental technologies and innovations to better serve our customers. Bringing Nobel Biocare’s deep expertise in implant dentistry, digital prosthetics and software solutions together with our extensive knowledge in 3D imaging, intraoral scanning and digital restorative solutions will further enable us to optimize and integrate workflows. This will lead to better clinical outcomes, shorter treatment times and fewer office visits to the benefit of patients and dental practitioners,” said Henk van Duijnhoven,Senior Vice President of Danaher’s dental platform. “This combination will further support our business strategy and position our dental business for future growth.”

Danaher’s dental platform reaches 99% of all dental practices through an extensive network of dealer partners as well as direct sales. It will continue its strategy of working closely with its highly valued distribution partners as well as direct sales to maximize market access for all its brands.

“Nobel Biocare’s leadership team has done an outstanding job creating a strong platform for future growth over the last couple of years,” van Duijnhoven added. “Our team is excited to work with CEO Richard Laube and the Nobel Biocare team to build on their efforts toward continued innovation, growth and business improvement. We look forward to welcoming allNobel Biocare’s associates, customers and key opinion leaders to the Danaher team.”

Click here to see what Jeff Johnson of RW Baird shares about the enterprise value.

Jeff Johnson of RW Baird shares how Wall Street will see changes in the enterprise value after Nobel Biocare joins with the Danaher team (DHR).

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DHR announced this morning plans to acquire leading dental implant provider Nobel Biocare for an enterprise value of $2.2 billion (just under 3x 2013 revenue). Across our list and the broader group of strategic dental players, we would be surprised to see a competing bid and near term we don't foresee meaningful implications for our covered companies from this deal, although DHR's strong equipment presence creates some longer-term issues to watch.

  • DHR announced plans today to acquire leading dental implant provider Nobel Biocare for CHF 17.10 per share, or an enterprise value of $2.2 billion (EV just under 3x based on NOBN's 2013 revenue of ~$750 million). Because DHR is covered at Baird by our industrial analyst Rick Eastman, we will leave thoughts on this deal from DHR's perspective to Rick.

  • As for implications from this deal on the broader dental landscape, we'd note the following:
  • We would be surprised to see a competing bid for NOBN from other strategic names in dental. We've discussed in prior notes reasons we didn't believe NOBN was a good fit for HSIC, XRAY or SIRO on our list, while STMN also seemingly ruled out interest recently, leaving few other strategic options, in our view.

  • From a near/intermediate-term perspective, we wouldn't expect a major change in competitive dynamics due to this deal. DHR's broad geographic reach and strong presence already in the value segment of dental implants present it with some interesting positives in this deal, but nothing that we think creates incremental challenges for our covered companies. On the positive side, DHR has a history of being price rational, which we'd typically consider a positive in a deal like this. In this case, however, we believe premium dental implant players (including XRAY) will likely continue facing pricing pressure from mid/lower-tier players regardless.

Longer-term, we believe DHR's strong presence in dental equipment, including in 3D imaging currently (especially with iCAT) and over time potentially in CAD/CAM (with Lythos) represent competitive issues that bear watching. In our view, DHR has a done a good job in recent years marrying the consumables and equipment sides of its dental business, with one (iCAT, Lythos) often helping drive sales of the other (Implant Direct implants, Insignia). We believe DHR might enjoy similar cross-selling synergies in this deal over time that implant manufacturers XRAY and STMN and equipment manufacturer SIRO aren't currently able to match.

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