The recent wave of consolidations within the diagnostics sector received another boost withDade Behring (Deerfield, Illinois) yesterday agreeing to be acquired by Siemens (Munich, Germany) for $77 per share, a deal value of about $7 billion (15.1 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 (Medical Device Daily, June 5, 2007). 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 (MDD, May 11, 2007). IMI also acquired Cholestech (Hayward, California) last month for $326.3 million (MDD, June 5, 2007). 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 (MDD, April 5, 2007).

The diagnostics unit also recently acquired 454 Life Sciences (Branford, Connecticut), part of Curagen (New Haven, Connecticut), for $155 million (MDD, March 30, 2007).

One other large deal in the sector failed to close, as General Electric (GE; Fairfield, Connecticut) reported earlier this month that it was scrapping its $8.13 billion acquisition of two diagnostic units of Abbott Laboratories (Abbott Park, Illinois) (MDD, July 13, 2007). 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:

Advanced Medical Optics (Santa Ana, California) reaffirmed its $75 per share bid for rival Bausch & Lomb (B&L; Rochester, New York), which is preparing to accept a rival proposal from Warburg Pincus and had asked AMO to improve its offer.

AMO said it would evaluate and respond to B&L's revision request, but that it believed its roughly $4.23 billion cash-and-stock bid to buy the eye care company "fully and fairly values" the company and is superior to a $3.67 billion offer from Warburg Pincus.

In a letter filed with the Securities and Exchange Commission on Tuesday, B&L told AMO that without revisions, its bid would probably be rejected in favor of Warburg Pincus's $65 per share offer.

AMO's third-largest shareholder, ValueAct Capital, earlier this month said it opposed the company's takeover bid.

"We continue to believe in the strategic and financial rationale for this combination and are confident in our ability to consummate the transaction," AMO said.

B&L must weigh the higher price and potential risks associated with AMO's cash and stock offer against the lower value, but greater security of the all-cash bid from Warburg Pincus. Warburg Pincus is not expected to raise its offer to thwart the AMO offer.

"Without further assurances as to value and certainty of consummation and, in particular, without concrete, credible evidence that holders of a significant percentage of the outstanding AMO shares would affirmatively support the proposed acquisition of Bausch & Lomb by AMO, the special committee and the board intend to revoke AMO's designation as an excluded party under the Warburg Pincus merger," the letter said

Warburg's bid already has antitrust approval, while AMO's would still require it.

AMO made its 11th hour bid for B&L on the last day of that companies "go shop" period in its agreement with Warburg Pincus (MDD, July 9, 2007). After that 50-day period, B&L would not have been able to solicit higher bids for the company. If the offer is consummated, AMO will have to pay Warburg Pincus a $40 million breakup fee.