Medical Device Daily Executive Editor
General Electric (Fairfield, Connecticut) reported following market close Wednesday that its deal to acquire two diagnostic units of Abbott Laboratories (Abbott Park, Illinois) will not be completed.
While both companies issued press statements saying that they had "mutually" agreed to walk away from the deal, at least one analyst said that the situation was likely a case of "buyer's remorse" on the part of GE.
The potential acquisition was first disclosed in January, with GE planning to acquire Abbott's primary in vitro and point-of-care diagnostics businesses for $8.13 billion (Medical Device Daily, Jan. 19, 2007).
Failure of the deal probably comes as a mild surprise to many since it had been approved by both U.S. and European regulators and was in line with GE Healthcare's long-term intent to pursue earlier diagnostics of disease.
GE's stated strategy has been to combine its large-hardware offerings in imaging with the less macro position in cellular diagnostics for broader range in the healthcare continuum of care. And deal failure would appear to be a fairly large speed bump along that path.
Larry Biegelsen, med-tech analyst with Wachovia Capital Markets, issued a report saying that both sides may have considered the initial deal terms unsatisfactory: Abbott's shareholders not happy with GE's offer and GE perhaps feeling "buyers' remorse" and attempting to reduce its offer.
Biegelsen said that the original $8.13 billion offer "appeared high." Plus, he and other analysts suggested that GE probably was concerned about the FDA warning letter sent to Abbott's diagnostics division in Irving, Texas, in March, concerning problems with its instruments testing.
Several analysts also were in agreement that the apparent extended timeline in reaching a deal conclusion indicated that GE was attempting to renegotiate the terms downward.
In its statement, Abbott said that deal termination would have no impact on its EPS guidance for the full year 2007 or the second quarter, and that its earnings outlook for 2008 would remain unchanged.
Biegelsen, however, said that termination of the deal reduces Abbott's "growth profile" and financial flexibility.
And he projected that potential offers for the diagnostics units could come in the future.
"Although [Abbott] indicated they will manage the diagnostics business for the long-term, we believe there were other bidders leading up to the time of the original agreement with GE and these bidders may re-emerge," Biegelsen wrote in his report.
He noted also that the Texas facility has been cleared by third-party inspectors, and that the FDA letter doesn't prevent launch of new products by Abbott and does not impact any other of its units.
In other acquisition news:
- LVB Acquisition and LVB Acquisition Merger Sub reported completion of its tender offer for all outstanding common shares of big orthopedics player Biomet (Warsaw, Indiana). The deal for Biomet to be acquired by holding company entities was disclosed late last year (MDD, Dec. 20, 2006).
LVB Acquisition and LVB Acquisition Merger Sub are indirectly owned by investment partnerships directly or indirectly advised or managed by The Blackstone Group, Goldman, Sachs & Co., Kohlberg Kravis Roberts & Co. and TPG. The tender offer expired, as scheduled, at midnight, EST, Wednesday.
The depositary for the offer has advised that a total of about 203,573,000 Biomet shares were validly tendered and not withdrawn in the offer, representing about 82.85% of Biomet's outstanding shares. LVB Acquisition Merger Sub has accepted for payment all Biomet shares validly tendered in the offer.
LVB Acquisition and LVB Acquisition Merger Sub will acquire all other Biomet shares at the same $46-a-share price and Biomet will become a subsidiary of LVB Acquisition, LVB Acquisition and LVB Acquisition Merger Sub.
- Microchip Biotechnologies (MBI; Dublin, California) reported acquiring what it called "key" patent rights from Pathwork Diagnostics (Sunnyvale, California) for sample injection structures in microfluidic separations. Financial terms of the transaction were not released.
The pending patent relates to sample injection structures and methods for defining accurate volumes of material for microfluidic separations.
"The addition of this intellectual property to our patent portfolio builds upon our strong patent position in microfluidic devices for life science, applied sciences, and diagnostic products," said Dr. Stevan Jovanovich, president/CEO of MBI. MBI is an early-stage company developing nanofluidic sample preparation and analytical instrumentation for life sciences, applied sciences and diagnostics markets, based on its NanoBioProcessor platform and associated Microscale-on-Chip-Valves.
The acquired pending patent was held previously by Predicant Biosciences , which in a 2006 merger became Pathwork, a genomics-based company focused on oncology diagnostics. Pathwork combines microarray technology with proprietary informatics to provide clinically actionable information in a robust and reproducible manner.
The company's first test — the Pathwork Tissue of Origin Test, under FDA review — is expected to aid in the diagnosis of patients with uncertain primary cancers, in which a tumor's origin cannot be readily identified.
- GEN Acquisition (New York) reported that it is extending its previously reported cash tender offers and consent solicitations for its 8% senior subordinated notes, due 2013, and any and all of the 2.5% convertible senior subordinated debentures, due 2025, issued by Genesis HealthCare .
The terms of the tender offers are amended accordingly.
The new expiration date for both tender offers is 5 p.m., EST, July 12, unless further extended or terminated by GEN.
The tender offers are being made in connection with the plan of merger among GEN Acquisition, GHC and GEN Acquisition's parent, FC-GEN Acquisition, that provides for the merger of GEN Acquisition with and into GHC, with GHC being the surviving corporation.
The tender offers are being extended to coordinate the expiration of the tender offers with the closing of the acquisition. GEN Acquisition reported that it has received tenders from holders of 100% of the 8% notes and 100% of the 2.5% notes.