Rapid diagnostics maker Inverness Medical Innovations (IMI; Waltham, Massachusetts) continued its recent buying spree with a report that it has agreed to acquire Cholestech (Hayward, California) in a stock-for-stock exchange deal valued at roughly $326.3 million.

IMI will acquire Cholestech’s shares for an exchange ratio of 0.43642 shares of IMI common stock for each share of Cholestech common stock.

This latest acquisition by IMI follows close on the heels of its pending $92.50-a-share buy of Biosite (San Diego). IMI bested rival suitor Beckman Coulter (Fullerton, California) in May by agreeing to pay $2.50 more per share (Medical Device Daily, May 11, 2007).

In March, the company acquired 75% of the capital stock of Instant Technologies (Norfolk, Virginia) for $43.7 million to be paid in a ratio of 70% cash and 30% stock (MDD, March 15, 2007).

Instant Technologies distributes rapid drugs-of-abuse diagnostic products used in the workplace, criminal justice and other markets.

In February, the company acquired Promesan (Milan, Italy), a distributor of point-of-care diagnostic testing products to the Italian marketplace, for about 113.4 million ($4.4 million) (MDD, Feb. 5, 2007).

Cholestech is a provider of diagnostic tools and information for risk assessment and therapeutic monitoring of heart disease and inflammatory disorders. IMI said it expects opportunities to develop between Cholestech and its existing point-of-care organization, as well as with those of other recently acquired and to-be-acquired companies and expects the transaction to be accretive in the short term.

Ron Zwanziger, CEO of IMI, said, “We expect that the acquisition of Cholestech, especially when coupled with our recent and pending acquisitions, will provide Inverness with the unique ability to assess cardiac risk, diagnose cardiac conditions and potentially monitor the condition and response to therapy of cardiac patients. The large installed base of Cholestech systems in physicians’ offices will also be helpful as we continue to expand into this market segment.”

The merger requires Cholestech shareholder approval and the satisfaction of other customary conditions. IMI shareholder approval is not required. The transaction is structured as a tax-free reorganization and is expected to close during the fall of 2007.

Covington & Associates acted as financial advisor and Foley Hoag acted as legal counsel to IMI. Savvian Advisors acted as financial advisor and Wilson Sonsini Goodrich & Rosati acted as legal counsel to Cholestech.

In other dealmaking:

• Stryker (Kalamazoo, Michigan) reported that it has completed the sale of its outpatient physical therapy business, Physiotherapy Associates , to Water Street Healthcare Partners (Chicago), an equity firm focused exclusively on the healthcare industry, for about $150 million in cash.

Water Street said it committed additional equity with the expectation of accelerating Physiotherapy Associates’ growth and building its market position through acquisitions. Physiotherapy Associates, which will retain its name, provides outpatient physical therapy services, such as general orthopedics, spinal care and neurological rehabilitation, through 475 clinics in 31 states.

“Physiotherapy Associates has been an important contributor to Stryker’s growth. As we focus our efforts on the medical technology market, we believe that Physiotherapy will be even more successful under the ownership of a party focused on healthcare services,” said Stephen MacMillan, president/CEO of Stryker.

Stryker said the sale of Physiotherapy Associates will result in a 2Q07 gain of $22 million-$26 million , or 5 cents-6 cents a diluted share.

Stryker will retain responsibility for certain cash damages to be paid in connection with a previously disclose investigation of Physiotherapy Associates’ billing and coding practices by the U.S. Department of Justice . The company’s liability for such damages has been fixed under the sale agreement, with interest to be accrued through the date of payment. Liabilities previously recorded by the company are sufficient to cover these obligations through the date of sale, it said. Stryker said it will continue to fully cooperate with the DoJ until the matter is resolved.

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