Agilent Technologies to split into two companies [The Press Democrat, Santa Rosa, Calif.]
(Press Democrat, The (Santa Rosa, CA) Via Acquire Media NewsEdge) Sept. 19--Agilent Technologies announced plans Thursday to split itself into two separate companies, with one of the new companies to be based in Santa Rosa.
The electronics measurement division will be spun off into its own stand-alone, publicly traded company.
"Today Agilent announced the biggest and most profound change in our history," Bill Sullivan, Agilent president and CEO, said in a conference call.
The change came 13 years after Agilent was spun off from its original company, Hewlett-Packard, creating what is now Sonoma County's largest high-tech employer.
"It's a historic moment for the company, frankly," said Guy Sene, president of the Electronic Measurements Group, who will stay on to lead the R&D, sales and marketing teams.
Agilent's life sciences and diagnostics divisions will retain the company name. The spinoff company, which is being referred to by Agilent as "the EM company," for electronic measurement, has not yet been named, executives said.
In Santa Rosa, more than 95 percent of the approximately 1,175 employees are part of the electronics measurement group, and will move to the new company, Sene said. Employees found out about the spinoff Thursday morning, said Jeff Weber, Agilent spokesman.
Executives chose Santa Rosa for the headquarters of the new company because of the Sonoma County unit's deep expertise in technology, research and development, he added.
"The rationale for the separation of the company is very straightforward," Sullivan said. "Agilent is involved in two distinct investment and business opportunities, and as two separate companies we believe we will be able to deliver enhanced shareholder value."
Before the announcement, Agilent faced mounting pressure from shareholders who were unhappy with revenue losses in the electronics measurement division compared with growth in the life science and diagnostic divisions.
"The board is always looking at how to improve shareholder returns for the company," Sene said. "There has been now (for) a few years a constant tension, where more and more of our investors are from the life science and health care sectors."
The health care investors didn't understand the electronics business, and they were especially unexcited about the cycles in the business, Sene said.
"We gave the shareholders the choice, and in this case, health care investors will be very happy with the new Agilent that is very focused on health care. For us, we will probably be more compared to companies in the IT sector," Sene said.
Ron Nersesian, who used to run the Santa Rosa division before he was promoted to president and COO of Agilent in 2011, will become the president and CEO of the new company.
"He knows our business really well, and in the past 18 months has been trained to be doing the CEO job," Sene said. "He is ready and has a strong set of management talents."
Nersesian and Sullivan addressed employees in the Santa Rosa office Thursday afternoon, Weber said. Sene was in Tokyo to help break the news to employees and customers in Asia.
The maneuver echoes the 1999 decision by Hewlett-Packard that created Agilent. At that time, H-P decided to focus on the computer and printer business, placing its test and measurement, chemical analysis, health care and semiconductor products groups into a new company.
"Agilent's history is one of reinvention, starting with our own separation from H-P and including four major spinoffs since 2005," Sullivan said. "We are once again making a bold move, as we have done many times in the past, to ensure a future of sustainable growth for both the (life science) and EM companies."
Having a $3 billion company headquartered in Santa Rosa could be a boon, said Jonathan Coe, president of the Santa Rosa Chamber of Commerce.
"I think it will be very valuable for our community," Coe said. "This will be the place where their primary focus is, both in terms of their business growth and expansion, but also in terms of their community involvement."
With the decision, Agilent is cleaving itself nearly in half, spinning off a business unit that generates 43 percent of its revenues and employs 45 percent of its workers. After the process is complete, Agilent will not retain any ownership of the new Santa Rosa-based company, Weber said.
The new electronics measurement company is expected to produce $2.9 billion in sales during 2013 and will employ 9,500 worldwide, the company said. Its stock will trade publicly, but is not initially expected to pay a dividend.
Agilent expects $3.9 billion in sales in 2013 from the business units that will remain with the parent company. That company, which will remain headquartered in Santa Clara, will employ 11,500.
Agilent shareholders will receive a pro rata distribution of shares in the new EM company through a tax-free spinoff, the company said. Shareholders will retain the same number of shares in Agilent, and will receive a similar, but probably smaller, number of shares in the new company.
The target date for completion of the transaction is the end of calendar year 2014, although there is no assurance it will be completed within that timeframe, the company said.
Agilent stock rose to $50.98 after the news, up 3.4 percent on the New York Stock Exchange. Analysts at ISI Group LLC, an international investment and strategy firm, upgraded the stock to a "strong buy."
Agilent's announcement that it split the business addressed a number of key shareholder concerns, said Ross Muken, senior managing director and partner of ISI.
"Health care investors in particular have avoided the relative volatility that accompanied the EMG business," Muken said in a report.
Last month, Agilent reported that quarterly revenues had fallen 17 percent in the electronic measurement division compared to the prior year, due to a lost contract with a wireless manufacturer and slower defense spending.
Meanwhile, revenues in its diagnostic and genomics division had jumped 54 percent, while its life sciences division grew 3 percent.
The decision to split the company in two is likely a sign that its executives intend to grow both businesses, said Rob Eyler, director of Sonoma State University's Center for Regional Economic Analysis.
"With the glass half full, it may be they're doing that because they want to brand that company on its own," Eyler said. "The other possibility is they are growing it for acquisition, and their intention is to sell it at some point, and they don't want to lose the Agilent branding."
The fact that the company did not announce layoffs Thursday was a good sign, Eyler said.
Now, the spinoff must come up with a new name. Any new name will have to be vetted worldwide, which makes the task of finding a new moniker tricky, Sene said.
"We need to make sure we don't have strange names that have different meanings in some cultures or languages," he said.
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