Waters Corp to acquire Wyatt Technology

Waters Corporation has entered into an agreement to acquire Wyatt Technology, a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories, and services, for $1.36 billion in cash, subject to certain adjustments. The transaction is expected to close in the second quarter of 2023, subject to regulatory approvals and other customary closing conditions.

A company release said, “Bioanalytical characterisation for new modalities including cell and gene therapies is a significant market opportunity, with a $1.8 billion total addressable market and 10-12 per cent projected annual growth. By applying Waters’ well-established business model, Empower informatics software, global reach and scale, Waters and Wyatt are well-positioned to build a high-growth bioanalytical characterisation business.”

It added, “Based in Santa Barbara, California, Wyatt is a privately held family company with 2022 revenues of approximately $110 million. With a worldwide workforce of more than 200 employees, Wyatt has been delivering world-class training and personal service to a global base of scientific customers. Since Wyatt’s scientists were the first to commercialise online multi-angle laser light scattering instruments more than 40 years ago, Wyatt has been defining and redefining state-of-the-art macromolecular characterisation instrumentation, software, and services to solve its customers’ unmet needs. Over the years, Wyatt has added several complementary technologies, including well-plate-based dynamic light scattering and field-flow fractionation for separating nanoparticles in solution. Together, its innovative product offerings are used across the value chain in discovery, product development, manufacturing, and QA/QC settings to determine the critical quality attributes of novel therapeutics such as cell and gene therapies, vaccines, and proteins, as well as synthetic polymers and nanoparticles.”

Strategic and financial benefits

Broadens Wyatt’s global reach: Waters will broaden Wyatt’s global reach and scale, further expanding its footprint in Europe and Asia. The combination will accelerate deployment of Wyatt’s light scattering technologies and techniques in downstream, high-volume, and recurring QA/QC applications, through Waters’ well-established Empower informatics platform.

Expands Waters’ portfolio and increases exposure to large molecule applications: Enhances Waters’ portfolio of separation and detection, which will provide customers with an unmatched set of analytical solutions across a wide range of applications. With more than 80 per cent of Wyatt’s revenue derived from large molecules, this will increase Waters’ exposure to exciting new applications within the bioanalytical characterisation market.

Immediately accretive to Waters’ revenue growth and margin profile: Wyatt has a three-year compound annual growth rate of 20 per cent, which is expected to grow low-teens over the near- to mid-term and has an existing adjusted operating margin of approximately 40 per cent.

Revenue synergies: Waters is expected to generate over $70 million in annual revenue synergies by the fifth year following transaction close.

Accretive to EPS with high single-digit plus adjusted ROIC: The transaction is also expected to be accretive to Waters’ adjusted earnings per share beginning in Q1 2024. The transaction is expected to deliver a high single-digit plus return on invested capital in year five, net of tax.

Waters will fund this investment through cash on its balance sheet and existing borrowing capacity available on its revolving credit facility. The Company will temporarily suspend its share repurchase program through the remainder of 2023 and utilise free cash flow to pay down debt. Kirkland & Ellis LLP is serving as legal counsel to Waters, while Wyatt’s legal counsel is provided by Glaser Weil Fink Howard Avchen & Shapiro LLP.