A Diagnostic & Imaging Week
Mindray Medical International (Shenshen, China) has agreed to acquire Datascope’s (Montvale, New Jersey) patient monitoring business for $202 million in cash, funded through Mindray’s internal cash and planned third-party borrowings. Datascope will retain about $38 million of receivables generated by the business.
During a Tuesday morning conference call to discuss the acquisition, Xu Hang, Mindray’s co-CEO and chairman called it a “landmark deal,” allowing Mindray to “overnight, dramatically, expand our on-the-ground presence in the U.S. and Europe.” Hang said the acquisition would create the third-largest player in the global patient monitoring device industry.
Datascope’s patient monitoring business brought in revenues of $161.3 million in 2007, roughly the same revenues generated from Mindray’s home China market, the company noted.
The deal has been approved by the boards of both companies and is expected to close in 2Q08. UBS Investment Bank acted as financial advisor and O’Melveny & Myers acted as legal advisor to Mindray.
The transaction is expected to be accretive to Mindray’s earnings per share on a non-GAAP basis starting in 2009, the company said.
“We are confident that this deal will create excellent value for our shareholders, the customers of both companies, and the patients who will ultimately benefit from greater access to the highest quality, most affordable, medical devices anywhere,” Hang said.
Mindray’s CFO Joyce I-Yin Hsu said the deal includes Datascope’s patient monitoring business, its manufacturing facility in Mahway, New Jersey, trademarks, its global technology services business associated with the patient monitoring business, its direct sales force, intellectual property, and its Netherlands warehouse facility.
In addition to broadening Mindray’s international presence and increasing its U.S. footprint, Hsu said the deal is expected to increase Mindray’s ‘07 revenue base by more than 50%. “We have acquired a strong and well-known brand name in the U.S. and Europe,” she said. “Under the current licensing deal we can continue to use [Datascope’s] brand until 2015.”
Hsu added that Mindray expects to achieve about $30 million in “run rate synergies” within three years of the acquisition. She also told listeners that the companies have a five-year history of working together.
“This is a market that in the U.S. is growing about 2% to 3% a year. Datascope, however, has been growing at much faster rates, given that it has a very strong representation in the higher-growth areas such as the 300-bed and below, small hospital and surgery centers.” Hsu said. “It also has a very strong business and high-growth in central monitoring systems, which is one of the strengths that we currently do not have, and with the transaction we would be better positioned to tap into the central monitoring business.”
Li Xiting, Mindray’s president/co-CEO, told call listeners, as translated by Hsu, that the company does not have any plans to move the manufacturing to Asia. “The current manufacturing base which we will be purchasing as part of this transaction in Mahway, New Jersey is going to be a very important strategic base for our global business going forward,” he said.
David Gibson, Datascope’s VP and president of its patient monitoring and technology services divisions, will serve as the president of Mindray’s Datascope patient monitoring business unit. The existing management team is expected to continue post-closing without significant changes along with the rest of the patient monitoring division staff, Mindray noted.
Currently, the majority of Datascope’s patient monitoring revenue is generated from sales in North America, with the remainder from markets largely in Europe, according to the company.
“This is an exceptional fit of complementary assets in the patient monitoring industry. Datascope’s strength in direct sales to under-300 bed hospitals, its leading market share in key niche areas, and direct sales and service team in the United States and Europe offer immediate cross-selling opportunities for Mindray’s high performance-to-price medical imaging systems,” Xiting said.
He added that the combined company would have leading market share in specific sub-segments of the U.S. patient monitoring market, such as ambulatory surgery centers, the hospital anesthesia market and the vital signs monitoring market as well as “significant strength” in centralized monitoring systems.
With the acquisition, Mindray will have about 4,100 employees, including about 440 Datascope employees.
In other dealmaking news:
• Analogic (Peabody, Massachusetts), an OEM supplier of radio frequency amplifiers for MRI systems reported that it has agreed to acquire privately held Copley Controls (Canton, Massachusetts), a supplier of gradient amplifiers for MRI and precision motion control systems. The purchase price is about $68.75 million in cash and up to an additional $1.8 million to reimburse Copley shareholders for the tax consequences of the transaction. Copley will become a wholly-owned subsidiary of Analogic.
The purchase price and additional reimbursement to be paid to Copley shareholders will be funded out of Analogic’s available cash and so is not subject to financing conditions.
Analogic President/CEO Jim Green said, “The addition of Copley, with its leading-edge technology in high-field gradient amplifiers and its solid customer base, will enable Analogic to expand our product offerings to our OEM customers, open up new opportunities in Asia, and enhance our position as a leading provider of medical subsystems for MRI scanners.”
Copley has offices and local technical support in the U.S., Europe, and Asia, comprising about 250 employees worldwide. Its revenues in 2006 were $73.6 million; preliminary calendar year 2007 revenues are estimated at $83 million.
• Bederra (Houston) reported completing the acquisition of privately held Lumar Diagnostic Imaging (Houston) for an undisclosed amount of cash and debt.
Lumar was formed to provide multi-modality medical diagnostic imaging services such as MRI, CT, ultrasound and pain management. The facility is located adjacent to the Houston Texas Medical Center.
Last year Lumar had revenues in excess of $4 million and was profitable, according to Bederra. It will operate as a subsidiary of Bederra under the new name of Lumar Imaging.