UPDATE: Danaher To Buy Testing-Device Maker For $340 Million

Danaher Corp. (DHR) will acquire Keithley Instruments Inc. (KEI) for about $340 million, bolstering Danaher's line of testing and measurement instruments for the electronics industry.

Danaher will pay $21.60 a share for the Cleveland company, a 74% premium to Tuesday's closing price. The stock had already more than doubled this year and last traded at the offer price in mid-2004.

The deal, set to close in the fourth quarter, will cost Danaher about $300 million as Keithley has about $40 million of cash and no long-term debt. Danaher plans to fold the company into its Tektronix testing unit.

"Keithley further solidifies Danaher's leading position in the test and measurement industry and presents an attractive value creation opportunity," said Jim Lico, Danaher's executive vice president, in a written statement.

Keithley's equipment is used to measure, connect and control direct electric current, radio frequency or optical signals. Last year, about 20% of the company's orders came from the semiconductor industry and about 30% came from precision electronics customers in sectors such as automotive, aerospace and medical. The wireless communications industry accounted for 5% of orders.

Keithley's exposure to cyclical industries has taken a toll on the company's performance in recent years. In 2009, Keithley lost $50.5 million, or $3.23 a share, as its net sales plunged 33%. The company imposed a series of cost-reduction measures, including cutting its workforce by 20%. Keithley also sold its radio frequency equipment line to Agilent Technologies Inc. in November 2009 for $9.0 million in cash.

Danaher, a Washington, D.C.-based diversified manufacturer, relies on acquisitions to fortify a slow-growing revenue base. The company has ratcheted up its purchases in the past year, focusing its acquisition efforts in medical technology, testing and measurement equipment, dental equipment and product identification technology used to track inventories of food, pharmaceuticals and other consumer products.

Danaher has a reputation for generating cash to finance its acquisitions and for aggressively expanding the profit margins of the companies it buys. Danaher in July reported its second-quarter profit rose 26% on better-than-expected sales.

Danaher's stock was trading down 0.82% at $41.12 a share.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; [e-mail]

(Tess Stynes contributed to this article.)