Medical Device Daily

Biomedical diagnostics instrument maker Beckman Coulter (BC; Fullerton, California) said Friday it will buy the lab-based diagnostics business of Olympus (Tokyo) for 77.45 billion yen, or about $800 million.

BC said the deal will provide it with new chemistry products, give it more tests for sale to hospital laboratories, and bring new customers to its immune system tests.

The company said it will cover $500 million of the buyout costs by issuing new debt, with the remainder – up to 37.5% of the purchase price – paid for in BC stock. The diagnostics business is part of the Olympus life science unit. BC said it expects the buyout to close in 3Q09, following regulatory approvals and other clearances.

"This compelling transaction combines the chemistry product lines of our two companies into a complete chemistry systems offering. It enhances Beckman Coulter as a leading provider of chemistry products with additional opportunities to expand our immunoassay reach into their chemistry installed base," said BC chairman/president/CEO Scott Garrett in a company statement.

"Customers will benefit from the expanded range of products, particularly those large hospital and university laboratories where higher throughput systems are preferred," he said. "In addition, Beckman Coulter's strength in total lab automation will be complemented by Olympus' strong pre-analytical automation position in Europe and Asia."

In a conference call on the deal, Garrett said the BC and Olympus product lines "fit together perfectly." He noted that while Beckman Coulter has U.S. scale, with about 50% of its revenue being generated from U.S. sales, the addition of the Olympus lab-based diagnostics unit "adds considerable scale in Europe," which accounts for roughly 48% of that company's revenue as opposed to 22% for BC.

Olympus generates roughly 30% of its revenue from the U.S. Along with a "respectable" position in the Asian market, Garrett noted that "through this combination, we achieve scale on a global basis.

"While Beckman Coulter products provide category-leading ease of use, Olympus products provide category-leading reliability," he said, adding that through this combination "we will be better able to serve our customers."

Garrett also noted that Beckman has always "had a gap at the ultra-high-throughput end ... so this [deal] really does accelerate our plans to move up into" that area.

Piper Jaffray (Minneapolis) analyst William Quirk said in a research note that the deal would likely increase Beckman's presence in reference labs and large-volume hospital labs, but is expensive in the near term.

BC said it expects the deal to add to its non-GAAP earnings per share in 2010. It expects the Olympus diagnostics business to increase revenue by about $500 million in 2010, on a full-year basis, and generate operating income of about $40 million to $50 million.

Importantly, the company said it does not think ratings agencies will revise their outlook on the company based on the new debt.

Morgan Stanley is acting as financial adviser and Latham & Watkins is serving as legal counsel to BC.

In the year's biggest med-tech deal to date, Abbott (Abbott Park, Illinois) reported that it has completed its previously disclosed acquisition of Advanced Medical Optics (AMO, Santa Ana, California). AMO is now a wholly owned subsidiary of Abbott and has been renamed Abbott Medical Optics.

Abbott reported early this year that it had agreed to acquire AMO for $22 a share in cash, or about $2.8 billion, including debt (Medical Device Daily, Jan. 13, 2009).

Abbott said the acquisition of AMO enhances and strengthens its diverse mix of medical device businesses and gives it a leadership position in the large and growing eye care market. Abbott Medical Optics holds the No. 1 position in LASIK surgical devices, the No. 2 position in the cataract surgical device market and the No. 3 position in contact lens care products, according to Abbott.

"As with previous acquisitions that have strengthened and diversified our business, we're entering a market that's aligned with demographic trends and growing medical need," said John Capek, executive vice president, medical devices, at Abbott. "This acquisition provides Abbott access to a $22 billion global market and the opportunity to help a very large patient population."

The final step in the acquisition process was a short-form merger of Rainforest Acquisition, a wholly owned subsidiary of Abbott, with and into AMO.

As a result of the merger, all outstanding shares of AMO common stock not tendered in the cash tender offer (other than those as to which holders properly exercise dissenters' rights) were converted into the right to receive $22 per share in cash, without interest and subject to any required withholding taxes.

In other dealmaking news, ConvaTec (Skillman, New Jersey), a developer of medical technologies for community and hospital care, reported that it has completed the divestiture of the Unomedical (Bikerod, Denmark) Wound Care and Ophthalmics business to Aspen Surgical Products Holding, a portfolio company of RoundTable Healthcare Partners, an operating-oriented private equity firm focused exclusively on the healthcare industry.

The divestiture of the Unomedical Wound Care and Ophthalmics business was a requirement of the European Commission following the $4.1 billion acquisition of ConvaTec by Nordic Capital and Avista Capital Partners (MDD, Aug. 4, 2008) and the subsequent integration of the Unomedical business with ConvaTec (MDD, Sept. 4, 2008).

Aspen has acquired the entire Unomedical Wound Care and Ophthalmics business activities as a going concern, including all personnel and the continued use of the facilities in Redditch, UK. Financial terms of the agreement were not disclosed.

PriceWaterhouseCoopers was corporate finance advisor for ConvaTec and The Wilkes Partnership served as legal counsel.

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