Danaher (DHR) – Split off Transaction – $635 upside

Danaher has updated the split off offer by increasing the upper limit and the situation became profitable one more time.

Current Price – DHR $85.44, NTCT $38.42

Offer Price – $107.53 stock of NTCT for $100 stock of DHR (subject to upper limit)

Upside – 7.5% or $636 for Odd Lot holders

Expiration date – July 9, 2015

Odd Lot holders (less than 100 shares) are not subject to proration

SEC Filling of the updated offer

Original SEC Filling

 

Update: 

On June 25, 2015, Danaher announced the amendment and extension of the Exchange Offer in the press release attached to the Schedule TO as Exhibit (a)(4)(iii). Danaher amended the Exchange Offer by:

increasing the upper limit on the exchange ratio to 2.4000 Newco common units per share of Danaher common stock tendered from 2.2522 of Newco common units per share of Danaher common stock tendered; however, the final exchange ratio may be less than the upper limit;

extending the Exchange Offer’s expiration to 12:00 midnight, New York City time, on July 9, 2015, unless extended or terminated, from July 8, 2015; and

amending the current expected three-day period over which the final exchange ratio will be determined to July 7, 8 and 9, 2015 (which previously was expected to be July 6, 7 and 8, 2015).

 

Summary:

Danaher Corporation (NYSE: DHR) announced today that it has commenced an exchange offer related to the split-off of its Communications business. The split-off transaction is in connection with the previously announced combination of Danaher’s Communications business with NetScout Systems, Inc. (NASDAQ: NTCT).

Danaher stockholders have the option to exchange some, all or none of their shares of Danaher common stock for common units of Potomac Holding LLC, a Danaher subsidiary formed to hold Danaher’s Communications business, subject to proration as described below. In the combination, common units of Potomac Holding LLC will convert automatically into the right to receive shares of NetScout common stock.

Tendering Danaher stockholders are expected to receive approximately $107.53 of NetScout common stock for every $100 of Danaher common stock tendered, subject to the upper limit described below.

Danaher will determine the prices at which shares of Danaher common stock and common units of Potomac Holding LLC (and ultimately shares of NetScout common stock) will be exchanged by reference to the simple arithmetic average of the daily volume-weighted average prices of Danaher common stock and NetScout common stock, respectively, on the New York Stock Exchange and the NASDAQ Global Market on each of the last three trading days of the exchange offer.

Danaher currently expects to issue approximately 62,500,000 common units of Potomac Holding LLC in the exchange offer. The number of shares of Danaher common stock that will be accepted in the exchange offer will depend on the final exchange ratio and the number of shares of Danaher common stock tendered.

The exchange offer is designed to permit Danaher stockholders to exchange all or a portion of their shares of Danaher common stock for common units of Potomac Holding LLC (which will convert into shares of NetScout common stock) at a discount of 7 percent to the per-share value of NetScout common stock, subject to an upper limit of 2.2522 Potomac Holding LLC common units for each share of Danaher common stock tendered in the exchange offer.

 

No proration for Odd Lot holders:

Beneficial holders  of less than 100 shares of Danaher common stock who validly tender all of their shares may elect not to be subject to proration by completing the section in the applicable letter of transmittal entitled “Odd-Lot Shares.” If your odd-lot shares are held by a broker for your account, you can contact the broker and request this preferential treatment. All of your odd-lot shares will be accepted for exchange without proration if Danaher completes this exchange offer.

 

Trading Strategy:

Buy 99 DHR and sell short 225 NTCT (ratios might change depending on the final exchange rate). Lock in gain of $450. Tender DHR for NTCT. Cover short position after receiving the exchange shares.

Warning – final exchange ratio will be determined on the last 3 days before expiration of the offer, therefore final payoff/loss might differ from the indicated one.