Roper Industries Inc. (
recently completed the acquisition of privately-held Sunquest
Information Systems Inc. for approximately $1.415 billion,
including $25.0 million in cash tax benefits. Roper used its
available cash and credit facility to fund the acquisition.
Tucson, Arizona-based Sunquest develops software solutions for
clinical and anatomic laboratory professionals. Its solutions are
used to improve workflow automation and integrate important data
that forms the backbone of diagnostics decision making. Sunquest
has a strong clientele of more than 1,700 hospitals worldwide.
Roper plans to integrate Sunquest in the Medical &
Scientific Imaging segment. Sunquest is expected to contribute
approximately $75.0 million in revenue through the rest of 2012.
The acquisition is expected to generate significant cash flow,
which prompted Roper to raise its operating cash flow guidance to
$700.0 million for fiscal 2012 (up from $650.0 to $675.0 million).
Roper expects the acquisition to generate EBITDA of approximately
$140.0 million or more in 2013.
Over the years, acquisitions have been an integral part of
Roper's growth story. To date in fiscal 2012, Sunquest is Roper's
fourth acquisition. Roper acquired Shanghai Hao Ying Measurement
& Control Technology Co, Ltd. (January), Cambridge Viscosity,
Inc. (February) and Ascension Technology Corp. (May) this year.
The recent acquisitions reflect Roper's focus on expanding its
high-margin businesses. Given Sunquest's significant growth
opportunities, recurring revenue stream and strong cash flow
generation, we believe that the acquisition will be accretive for
Roper over the long term.
Roper recently announced its second quarter 2012 results. Total
revenue increased 3.5% year over year to $724.9 million, with
acquisitions contributing 3.0% to revenue growth, while 3.0% came
from organic growth. For further details please see
Roper Posts EPS In line, Revs Miss
We believe that Roper will continue to pursue acquisitions based
on its strong balance sheet and solid cash flows. At the end of the
second quarter, Roper's cash and cash equivalents were $518.9
million. Along with the new $1.5 billion credit facility, it looks
to be well-equipped to buy companies with significant growth
opportunities in the near term.
We believe that strong backlog coupled with robust organic
growth will drive earnings growth going forward. Moreover,
accretive acquisitions will expand its product portfolio, providing
a significant competitive edge over peers such as
Agilent Technologies Inc. (
Halliburton Company (
over the long term.
We maintain an Outperform recommendation over the long term
(6-12 months). Currently, Roper has a Zacks #1 Rank, which implies
a short-term Strong Buy rating on the stock.
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