The recent wave of consolidations within the diagnostics sector received another boost with Dade Behring (Deerfield, Illinois) last week agreeing to be acquired by Siemens (Munich, Germany) for $77 per share, a deal value of about $7 billion (15 billion).
Deal closing is expected in the second quarter of FY08, with Dade becoming a unit of the Siemens Medical Solutions (SMS; Malvern, Pennsylvania) business.
Dade Behring provides clinical laboratory equipment and integrated solutions for routine chemistry testing, immunodiagnostics (including infectious disease testing), hemostasis testing and microbiology. With its roughly 6,400 employees, it realized sales of about $1.7 billion in FY06 and an EBIT of $201 million including $21 million restructuring expense.
Siemens’ agreement to buy the company at a 38% premium over Tuesday’s closing price follows a flurry of other recent deals in the sector. In June, Qiagen (Venlo, the Netherlands) agreed to acquire Digene (Gaithersburg, Maryland) for $1.6 billion. And in May Inverness Medical Innovations (IMI; Waltham, Massachusetts) beat out rival Beckman Coulter (Fullerton, California) for the right to acquire Biosite (San Diego) for $92.50 a share. IMI also acquired Cholestech (Hayward, California) last month for $326.3 million. And Roche, via its Roche Diagnostics (Mannheim, Germany) unit yesterday reported that it had completed its $600 million acquisition of BioVeris (Gaithersburg, Maryland) which it first disclosed in April.
The diagnostics unit also recently acquired 454 Life Sciences (Branford, Connecticut), part of Curagen (New Haven, Connecticut), for $155 million.
One other large deal in the sector failed to close, as General Electric (GE; Fairfield, Connecticut) reported in early July that it was scrapping its $8.13 billion acquisition of two diagnostic units of Abbott Laboratories (Abbott Park, Illinois). While this deal is undone for now, there is real possibility, given the frenzy in the sector, that another buyer for the Abbott units awaits in the wings.
Analysts also see Beckman Coulter, one of the last remaining large pure-play stand-alone diagnostics companies as another likely acquisition target, with GE possibly being that buyer.
Currently, Siemens has about 12% of the diagnostics market, while Dade and Beckman each have about 11% to 12%. Roche has about 18%.
Morningstar analyst Alex Morozov said Dade’s Vista technology gave it an advantage over Beckman Coulter in Siemens’ eyes. The diagnostic tests are used widely in smaller-volume laboratories.
“There’s no clear leader here, and I think that was one of the drivers for Siemens’ decision [to acquire Dade],” Morozov said in a report.
“Demographic changes and increasing demand for higher quality healthcare systems represent a constant driver for growth in this sector,” said Peter L scher, CEO of Siemens. “Complementing last year’s acquisitions of Diagnostic Products Corporation [Los Angeles] and Bayer Diagnostics [Tarrytown, New York], this transaction secures our leading position in the highly attractive healthcare industry. The impact of the Dade Behring acquisition on Siemens EPS is expected to be accretive from fiscal year 2010.”
“The planned acquisition of Dade Behring complements our current capabilities and offers us the unique opportunity to create an unparalleled portfolio of products and services, and become world market leader in comprehensive clinical laboratory diagnostics,” said Erich Reinhardt, president of SMS.
Siemens is expected to commence a tender offer for all outstanding shares of Dade Behring common stock by Aug. 8. The board of Dade Behring has voted unanimously to recommend to holders of Dade Behring common stock that they tender their shares in the tender offer. The tender offer is still subject to various conditions, including the tender of a majority of the shares of Dade Behring common stock and the receipt of regulatory approvals.
“Combined, Dade Behring and Siemens will have the potential to become uniquely positioned as the largest provider of clinical diagnostic products and services in the world,” said Jim Reid-Anderson, president/CEO and chairman of Dade Behring. “We will continue to serve our clinical laboratory customers with the same care and commitment that we always have, by providing innovative products and outstanding service that meets their needs. Dade Behring’s customer excellence business strategy has been the foundation of our success, and as part of Siemens Medical Solutions Diagnostics, the combined businesses will continue to follow that same strategy into the future.”
In other dealmaking news:
• Inverness Medical Innovations (IMI; Waltham, Massachusetts) and Cholestech (Hayward, California) reported the U.S. antitrust waiting period for IMI’s proposed $326.3 million stock-for-stock acquisition of Cholestech has expired without a request for additional information. The acquisition is structured as a stock-for-stock merger at a ratio of 0.43642 shares of IMI common stock for each share of common stock of Cholestech, and is currently scheduled to close in 3Q07.
“While we fully expected this outcome, we are nevertheless delighted to be able to move forward expeditiously with closing this exciting deal pending approval by Cholestech’s shareholders,” said Ron Zwanziger, president/CEO of IMI. “The combination of Inverness and Cholestech will provide a unique opportunity to comprehensively assess cardiac risk, diagnose cardiac conditions and potentially monitor the condition and response to therapy of cardiac patients.”
IMI manufactures rapid diagnostic products. Cholestech is a provider of diagnostic tools and information for immediate risk assessment and therapeutic monitoring of heart disease and inflammatory disorders.