Between Hologic's (Bedford, Massachusetts) focus on breast cancer diagnostics and Cytyc's (Marlborough, Massachusetts) focus on cervical cancer diagnostics, a merger of the two companies would appear to have the female anatomy covered.
The companies late Sunday reported that Hologic will pay $6.2 billion in cash and stock for Cytyc, creating what it calls a "$10 billion global leader in women's healthcare."
The deal prices Cytyc shares at $46.46, a 33% premium to Friday's closing price of $35.05. Hologic will pay $16.50 in cash and 0.52 share of its own stock for each share of Cytyc.
"We're going to be able to offer comprehensive women's health solutions in the form of a product portfolio that addresses critical screening, diagnostic and treatment needs including breast cancer, cervical cancer, menorrhagia, osteoporosis, contraceptives, preterm delivery, permanent contraception, endometriosis, and less invasive approaches to tissue-extraction and radiation treatment," said Jack Cumming, Hologic's CEO and chairman, during a Monday morning conference call.
Cumming called the combination of the two companies a "natural fit."
Hologic's headquarters will remain in Bedford, while Cytyc's offices will stay in Marlborough, Cumming said.
The deal is subject to approval by shareholders of both companies.
Patrick Sullivan, Cytyc's president/CEO and chairman, told conference call listeners that together Hologic and Cytyc "are creating a global leader in women's health focused on every point in a women's life cycle."
Located just 15 miles apart, the two Massachusetts-based companies over the years have looked for ways to work more closely together, Sullivan said.
"When Hologic approached us several months ago, things heated up and the obvious benefits of the combination made this a logical next step in the evolution of our companies," Sullivan said. He added that the deal would offer Cytyc shareholders "solid value today" as well as the opportunity to participate in the long-term prospects of the merged corporation.
"We believe that the combined company will be a market-share leader in its product lines," Sullivan said.
Not only does the merger of Hologic and Cytyc make sense from a product standpoint, but Glenn Muir, CFO for Hologic, told call listeners there was also a "powerful financial rationale behind it as well."
"The combination provides us multiple platforms to drive top and bottom-line growth, such as access to new channels with existing products and combined infrastructure to provide greater operating leverage," Muir said.
For example, Muir noted, "many of the physicians who use our breast cancer products are the same across both companies, allowing us to not just add new customers to our combined base but also accelerate adoption of new and existing products."
The companies expect deal completion in the third quarter. Muir said the transaction would be more than 10 cents accretive to Hologic's consensus adjusted EPS in the first year after close and "significantly" more accretive thereafter.
The new company will be called Hologic, with Cytyc, upon closing, becoming a Hologic subsidiary.
Hologic said the combined company would have a product portfolio that includes such brands as ThinPrep, Lorad, NovaSure, Suros ATEC, Discovery, FullTerm, R2 and MammoSite. The combined company also will have direct operations in more than 20 countries with more than 3,300 employees, including 1,200 sales and service professionals.
According to the companies, benefits of the combination include a comprehensive women's health product portfolio using best-in-class technology; cross-selling opportunities; an expanded international presence; cost savings; and "dedicated and talented" management and employees.
With deal completion, Hologic shareholders will own roughly 45% of the combined company, and Cytyc shareholders will own about 55%.
For Hologic's FY08, combined revenues are expected to be in excess of $1.7 billion, Muir said, with combined adjusted EPS in the range of $2.35 to $2.40.
Cumming will become CEO and Sullivan will become chairman of the combined company. The company will have 11 directors, six nominated by Hologic, five nominated by Cytyc.
In other dealmaking news:
• Woodbridge Group (New Haven, Connecticut), a mergers and acquisition firm, reported the sale of Ace Medical Equipment (Clearwater, Florida), a distributor of medical equipment to Sunnex (Stockholm, Sweden), a manufacturer of medical lighting systems.
Woodbridge Group advised Ace in the transaction. Terms were not disclosed.
Robert Murphy, Woodbridge's COO, said, "We were able to find a strategic buyer who could build on what Ace Medical Equipment had achieved." Jim Kleyman, president of Ace, will remain as the company's president.
Ace sells new and refurbished medical and surgical equipment to hospitals, surgery centers and office-based medical practices.
Besides manufacturing medical and industrial lighting, Sunnex manufactures anti-vibration and leveling products. The company has offices in the U.S., France and Germany, with sales and service representatives in more than 40 countries.
• Quest Diagnostics (Lyndhurst, New Jersey) reported launch of a cash tender offer for all the outstanding $350 million principal amount 10-1/2% senior subordinated notes due 2013 of AmeriPath (Palm Beach Gardens, Florida). The tender offer is being made by Quest in connection with its agreement to buy AmeriPath for about $2 billion, including roughly $770 million in debt at closing (Medical Device Daily, April 17, 2007).
The tender offer is part of a plan by Quest to refinance indebtedness, reduce interest expense and eliminate certain provisions in the indenture governing the notes. Quest intends to pay for the acquisition of AmeriPath and to refinance the notes with a portion of the proceeds of a new, one-year, $1.1 billion bridge loan and a five-year, $1.5 billion term loan.
The tender offer is subject to various conditions, including successful completion of the acquisition of AmeriPath. It will expire at midnight, EDT, June 18, unless extended or terminated.
Morgan Stanley & Co. will act as dealer manager.
• Genesis Healthcare (Kennett Square, Pennsylvania), a long-term care provider, said it has amended its merger agreement with a venture between affiliates of Formation Capital (Alpharetta, Georgia) and JER Partners (McLean, Virginia) to increase the consideration payable to Genesis shareholders to $69.35 a share in cash. If the transaction is not completed before July 31, the price will increase by roughly 9% a year, or $0.01710 a day, from July 31 through Aug. 31, and by about 10% a year, or $0.01900 a day, from Sept. 1 until the transaction closes.
The increased price of the deal values Genesis at roughly $1.9 billion, including the assumption of about $475 million in debt.