* Deal to generate $470 mln in net after-tax cash
* Proceeds to be used for acquisitions, share buybacks
* To be dilutive by $0.08 to $0.10 per share in 2011
By Bill Berkrot
NEW YORK, Aug 31 (Reuters) - PerkinElmer Inc (PKI.N) said on Tuesday it agreed to sell its specialty lighting business to private equity firm Veritas Capital Fund III LP for about $500 million and use the proceeds for acquisitions and stock repurchases.
The deal, which is expected to close by the end of the year, will give the scientific instruments maker net after-tax cash proceeds of about $470 million and cut 2011 earnings by 5 percent to 6 percent, the company said.
The Illumination and Detection Solutions (IDS) unit includes about 3,000 employees and 14 manufacturing plants, and is expected to generate sales of about $300 million this year, PerkinElmer said. The unit makes lighting for medical equipment, such as endoscopes, and specialized industrial lighting and sensor components.
“The proceeds were a little better than we thought,” PerkinElmer Chief Executive Robert Friel said in a telephone interview.
“This gives us an opportunity to really redeploy it into the more core, higher growth opportunities in the human health and environmental health end markets,” Friel said.
The company now forecasts organic revenue will grow at a high single digit rate and sees adjusted third-quarter earnings from continuing operations of 27 cents to 29 cents per share, excluding items. IDS going forward will be treated as a discontinued operation, the company said.
For the full year, PerkinElmer expects adjusted earnings from continuing operations of $1.24 to $1.29 per share, excluding items.
“When you pull the IDS business out of PerkinElmer you actually see higher top line growth, you see less cyclicality, much more stable revenue and you also see higher gross margins,” Friel said.
PerkinElmer has not issued a formal 2011 forecast but said the IDS sale would likely cut earnings by 8 cents to 10 cents per share.
Friel said the company will have higher growth on both the top line and bottom line without IDS.
“So while it may be a little dilutive in 2011, we think going forward it’s a company that has a much stronger financial profile,” he said.
PerkinElmer also said that its board has authorized an increase in the number of shares of the company’s common stock available for repurchase to 13 million. (Reporting by Bill Berkrot; Editing by Steve Orlofsky)