DHR - Danaher

[Spekulatius]

It seems spin-offs are being used in lieu of selling the division. Maybe lack of interest or pricing. One day we might see a spinoff like this: Spinning off the entire operation minus the cash at headquarters!

 

Maybe the tax basis is so low on the spin's assets that the tax hit makes a spin off more attractive? Does anyone fault Malone for spinning off assets instead of selling them?

 

Spek, are these really crappola businesses? Next time you pump gas, check who makes the gas terminal. It's almost certainly GVR, which has a very high market share (>50%).

 

Matco Tools operates in a pretty comfortable oligopoly that includes Snap-On Tools. SNA earns over 20% on tangible equity.

 

There are probably concerns about the automotive business being in secular decline once electric vehicles take over, which is perhaps the main risk to these businesses.

 

That risk notwithstanding, why are these bad businesses?

 

You are correct, FTV’s business aren’t bad I do think that DHR dental business looks suspect, but that has nothing to do with FTV.

 

Spinoffs are tax efficient, that’s why they are often preferred over selling.

[Broeb22]

Yeah, the dental business has had some issues. I think some of it was them losing out to ALGN's Invisalign technology. With the Invisalign patent rolling off, that could contribute to some better than expected results from DHR Dental.

 

The return on tangible assets of DHR Dental (>50%) is as high as Invisalign, but it obviously has not been growing the last few years. It has a higher ROC than XRAY, so a valuation somewhere above XRAY and below ALGN makes sense. Given where XRAY trades, I'm not sure DHR Dental (Envista) will trade cheaply out of the gate. But, to your argument, I'm not sure it's a bad business, just not a fast-growing one.

 

Long-term, being in dental seems like a good place to be. How many billions of people don't have access to even basic dental care?