Stock Market Tender Offer- Danaher Corp. (DHR)

[Recyclersteve]

For those of you who follow the stock market and have money you can use to take calculated risks, here you go:

Before I get into specific details of this transaction, let me first say that I am semi-retired and totally out of the financial industry. I was employed by a well-known brokerage firm for almost 20 years. Also, the type of deal I am talking about below is NOT WELL KNOWN in the financial industry- as you will see it benefits smaller shareholders so very few stock brokers have an incentive to study up on the subject. I have done these transactions for well over 10 years with my own accounts and they have done very very well over the years. That said, this is not a specific recommendation for you to participate in this offer. I know little to nothing about you and have no idea about your investable net worth, appetite for risk, etc.

Danaher Corp. (Ticker: DHR) has a tender offer where those who tender shares will get up to 5.5784 shares of Envista Holdings Corp. (Ticker: NVST) in exchange. Preference is being given to those with 99 or fewer shares per tax ID, so you are gambling if you buy 100 or more. What that means is that people who have 99 or fewer shares AND validly tender all of their shares will have all of them taken. Those with 100 or more will be prorated- in other words they may have only 10-20% (or some small amount) of the shares taken. The exact percentage that will be taken from the larger shareholders is virtually impossible to predict, so the easy thing to do is just stick with 99 or fewer.

Examples: Let's say that, for example, 15% of the shares are accepted by Danaher.
1. You buy and validly tender 99 shares- all 99 (100% of your shares) are taken.
2. You buy and validly tender 100 shares- 15 shares (15% of your shares) are taken- the other 85 are returned to you.
3. You buy 100 shares and tender 99 shares- 14 shares (15% of the 99 tendered) are taken- the other 85 are returned to you.
4. You buy 10,000 shares and tender all- 1,500 shares (again 15%) are taken- the other 8,500 are returned to you.

DEADLINES: The official exchange deadline is Friday, December 13th (yes, I'm aware of the whole Friday the 13th thing), BUT the deadline at your broker will likely be 1-3 days earlier than the official deadline and your broker's deadline is the one you need to be concerned about. For me, the deadline at Schwab is Thursday the 12th at 7pm EST.

WHEN YOU GET YOUR MONEY: You should be out of the stock with cash in your account right around Christmas time. It will likely be just a few days before Christmas, but could be a few days afterward.

TARGETED PROFIT: Danaher is targeting a potential profit of 7.53%. The odds of making exactly that much are very very slim. In the past these corporate actions tend to pay more than the targeted amounts. Of course that means you could make less and there is a slim chance (I'd guess 5% or less) that you could lose money. One in the past few years that blew up was Bluebird (Ticker: BLBD), which makes school buses. The problem with BLBD was that it was a very small company (Market Cap: $500M) where a single institutional holder got upset about special treatment given to those with 99 or fewer shares and had the clause removed. Danaher is a company with a market cap of over $100 BILLION, so there is nobody like that small institutional holder to worry about. DHR is roughly 200 times the size of BLBD and did a tender 4 years ago. I am not concerned at all about this deal blowing up, although anything can happen from time to time.

EARNINGS: Earnings should NOT be a factor for either company. Both don't announce earnings till late January, well after the time you should be out of the stock and back into cash.

DIVIDENDS: Envista doesn't pay a dividend. Danaher's div is only 1/8 of a percent per quarter and the next ex-dividend date is AFTER Christmas, so that shouldn't be a factor either.

PAST HISTORY: Danaher did a tender offer with a company called NetScout in Summer, 2015. I participated and it went very well. So Danaher has done this before and knows how it works.

HOW IT WORKS: This is a bit complicated (I apologize for that), but it is very important to follow this closely in order to have a smooth transaction. You need to have a brokerage account in order to participate. If you have the luxury of buying in a retirement account (such as an IRA), all the better. That way, you won't have to worry about paying tax on any profit you get- at least not until you take the money out of the retirement account.

You buy up to 99 shares of Danaher in your brokerage account- at today's close 99 shares costs about $14,400. There is no minimum- you can buy just one share if you'd like. But keep in mind that you will need to have the proceeds cover any commission you pay to buy and sell (at Schwab and several other firms there is NO commission). Also, you will need to cover any type of Reorganization (aka Reorg) Fee- often $25-50 or so. So if you bought only 1 share, chances are you would lost money. You can buy up to 99 shares per person, so if you and your spouse and 2 kids all have IRA's in your own names, that means you can buy up to 99 shares each for 4 people (a total of 396 shares).

When you get the shares of DHR in your account, call your broker and ask them how to tender shares to get shares of Envista (in other words the tendering will be an exchange of your more expensive Danaher stock for many more shares of the less expensive Envista stock. VERY IMPORTANT: You must tender ALL THE SHARES you own and it must be 99 or less per person. So if you buy 99 and decide to hold onto a single share for sentimental reasons, you will only have a percent of your shares taken. If you buy 99 and tender all of them, ALL will be taken.

Let's say you have someone who manages money for you. In that managed account you have dozens of stocks. One of them is Danaher and let's say you have 20 shares of DHR in the managed account. In that case don't buy more than 79 additional shares, so that your total number of shares doesn't ever exceed 99 shares. Also, you will need to communicate with the person who manages the account so that they tender the 20 shares for you. Because if you have 99 shares and only tender 79, you will be prorated and have only some of your tendered shares taken- the others will be returned to you.

You are responsible for monitoring the deadline at your broker. If you are afraid that you will forget, there is absolutely no shame in tendering right away.

Monitor your account(s) closely after you tender the shares. One day you will notice that the DHR shares are gone and have been replaced by NVST shares. Once the NVST shares are in the account you are free to sell them. Of course, you will want to make sure that you have an acceptable profit first. Another point about the NVST shares- at Schwab the shares hit the account late at night- after the market is closed and even after the after hours trading is closed. If you prefer, you can always sell your NVST shares in the pre-market session the following day, so before the regular 9:30am EST market open. If you aren't familiar with extended hours trading, you may prefer to just wait for regular market hours to sell.

My best guess estimate is that profit on 99 shares (after commissions and reorg fees) should be in the neighborhood of $750-1,500. This is NOT a totally risk free deal- you must be willing to take some risk before doing this. But since DHR is already trying to "give" you a profit of around 7 1/2% and since these deals have worked out very well in the past (and since DHR has done one before that worked out), I am absolutely not afraid to participate. I have already bought shares in two accounts for two different people.

The number of shares of Envista being given for Danaher is being tracked daily on the following website:

http://investors.danaher.com/envista-exchange-offer

Good luck to all regardless of what you do.

[Recyclersteve]

Anyone have any questions about this corporate action? You don’t have a lot of time to act.

[highroller4321]

Thank you for sharing the opportunity.

[Recyclersteve]

Does anyone know when the deadlines are for Fidelity, Etrade, Merrill Edge and/or TD Ameritrade? I suspect all will have deadlines that are either Wednesday or Thursday. Schwab's deadline is 7pm EST on Thursday. Keep in mind that the official deadline for the deal (next Friday) and the deadline at your broker are two different things.

[Recyclersteve]

An update- the final exchange ratio has been announced. For every share of Danaher (DHR) that is accepted in the deal you will get 5.5784 shares (the maximum allowed in the deal) of Envista (NVST). It is too early to know exactly what the profit will be as shares of NVST won't show up in accounts for another 7-10 calendar days or so. I plan to update this thread with my final totals- good or bad- when I sell my NVST.

[Recyclersteve]

I was contacted a number of times via personal messages on this deal and thought I'd provide an update on what happened.

I did 99 shares in one of my accounts and 90 in my daughter's account. In my account I made $1,354.00 and my daughter made $1,225.29. Both accounts had 9.4% profits and we were invested in the deal for 17 days total. If you prorate a 9.4% profit in 17 days that equates to a profit of 201% for the year, which is spectacular. The problem with that math is that these deals only happen a few times a year and you can only do 99 shares per tax ID to get that kind of return. So many are not able to dump their entire accounts into these deals.

One other little tidbit- there will be a small amount of money (perhaps $5-10 per account) paid in cash over the next several days for the remaining fractional share of NVST. That will make the final profit totals a bit higher for us.