Summary
Colfax is making a very large and fully valued diversification move.
The deal comes as a big negative surprise to investors, as accretion is likely and expected to be limited.
The company will incur substantial transaction costs and increase leverage a great deal.
The need to deleverage might hurt proceeds from the pending sale of the air & gas business as well.
Given all of this, I find it very easy to avoid the shares for now.
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Colfax (CFX) has made a sizeable acquisition which did not please investors. Shares plunged 15% in response to the $3.15 billion acquisition of DJO Global. Making such a large acquisition to diversify and blow up leverage ratios, with no synergies in return, seems like an ill-advised move, as investors seem to agree.
Hence, shares are selling off quite aggressively as I understand the caution displayed by investors. In fact, I am very cautious as well despite the big pullback as the track record of the company has not been great at all in recent years.
