Big consolidations in the diagnostics sector continued this week withQiagen (Venlo, the Netherlands), a maker of genetic testing equipment, reporting over the weekend that it will acquireDigene (Gaithersburg, Maryland) and Inverness Medical Innovations apparently driving to become what might be called a conglomerate with still another acquisition (see adjacent story).

Qiagen will buy Digene for $1.6 billion in cash and stock, to expand into testing for cervical cancer and sexually transmitted diseases. The deal values Digene shares at $61.25, a 37% premium to its closing price on the NASDAQ on Friday.

Digene shareholders may elect to receive for each Digene share either $61.25 in cash or 3.545 shares of Qiagne stock, subject to pro-ration so that the total consideration issued for Digene stock consists of 55% cash and 45% Qiagen stock.

Qiagen shareholders will own about 78% of the combined company and Digene shareholders will own about 22%.

Qiagen, one of the world’s largest providers of molecular diagnostics products is acquiring Diegne, whose flagship product is a test for the detection of human papillomavirus (HPV), the cause of essentially all cervical cancers after a decade long collaboration between the two companies.

The Centers for Disease Control and Prevention (Atlanta; CDC) estimates that 6.2 million Americans acquire a new genital HPV infection every year and that 80% of women will be infected by the age of 50, the companies said.

The Digene HPV Test is the only test for HPV that is both FDA-approved and CE-marked.

“The strategic rationale for this transaction is compelling as it combines Qiagen’s leading technology portfolio and our breadth of molecular diagnostic tests with Digene’s leadership in what is seen as the fastest-growing segment of molecular diagnostics,” said Peer Schatz, CEO of Qiagen, during a conference call discussing the merger. “The joint franchises link virology with oncology, thereby creating an exceptional platform to add next-generation and high-value molecular diagnostic products and strategically position the company for future growth. Schatz noted that “currrent estimates predict a global potential market of more than $1 billion for HPV testing.”

“We are pleased to be able to build on the successful partnership we have had with Qiagen for more than a decade,” said Daryl Faulkner, president/CEO of Digene. “We have collaborated on various projects, such as our current Rapid Capture system, which Qiagen co-developed and manufactures. By accelerating this existing and productive working relationship, we anticipate future growth opportunities and have already begun to develop new products.”

Qiagen expects the acquisition to contribute revenue of $58 million to $60 million in the fourth quarter and $260 million to $270 million for the full year 2008 and the combined company will have more than 2,500 employees worldwide.

On an adjusted basis excluding one-time charges, integration and restructuring costs and other items, Qiagen said the acquisition is expected to dilute Qiagen’s adjusted earnings by 3 cents to 4 cents per share in the fourth quarter. It is anticipated that the transaction, slated to close in August or September, will boost Qiagen’s adjusted earnings in 2008 by 2 cents to 4 cents per share.

In connection with the transaction, Goldman, Sachs & Co. is acting as exclusive financial adviser to Qiagen, and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., De Brauw Blackstone Westbroek, and Freshfields Bruckhaus Deringer are legal counsel. JP Morgan is acting as exclusive financial adviser to Digene, and Ballard, Spahr, Andrews & Ingersoll are legal counsel.

In other dealmaking:Flextronics International (Singapore) reported that it will buy rival contract electronics manufacturer Solectron (Milpitas, California) for about $3.6 billion in cash and stock.

The companies said that, combined, they will have the broadest worldwide electronics manufacturing services capabilities, from design resources to end-to-end vertically integrated global supply chain services, which will enhance its ability to design, build, and ship a complete package product for its original equipment manufacturers customers, the companies said.

Each share of Solectron stock will be converted into the right to receive, at the election of each of the individual holders of Solectron shares, either, but not a combination of either 0.3450 shares of Flextronics or a cash payment of $3.89 per share, subject to the limitation that not more than 70% in the aggregate and no less than 50% in the aggregate of Solectron shares will be converted into shares of Flextronics.

The cash being offered represents a premium of about 15% over Solectron’s closing price of $3.37 on Friday, while the stock portion represents a 20% premium based on Flextronics’ Friday closing price.

Flextronics provides design and electronics manufacturing services to OEMs of a range of products in the computing; mobile; consumer digital; telecommunications infrastructure; industrial, semiconductor, and white goods; automotive, marine, and aerospace; and medical device markets.

Solectron provides electronics manufacturing and supply chain management services to OEMs in the electronics products and technology market, including in medical products, such as X-ray equipment, ultrasound fetal monitors, MRI scanners, blood analyzers, insulin delivery devices, ECG patient monitors, surgical robotic systems and spectrometers.

The merger between the biggest U.S. companies in the contract electronics industry would create a company with more than $30 billion in annual revenue and a workforce of about 200,000, they said.

“We will be a larger, more competitive company and therefore better positioned to deliver supply chain solutions that fulfill our customers’ increasingly complex requirements,” Flextronics CEO Mike McNamara said on a conference call.

Flextronics said that Citigroup Global Markets has committed to provide it with a $2.5 billion seven-year senior unsecured term loan to fund the cash requirements for the transaction (including the refinancing of Solectron’s debt, if required).

Solectron will become a subsidiary of Flextronics, with Solectron shareholders owning 20%-26% of Flextronics’s outstanding shares.

Flextronics said the combined entity could cut costs by up to $200 million, although it could take as much as 24 months to integrate the companies.

The acquisition is expected to close by the end of 2007.