Diagnostics & Imaging Week
And D&IW

MDS (Toronto) and Molecular Devices (Sunnyvale, California) reported signing a definitive agreement for MDS to acquire Molecular Devices, a provider of measurement tools for high-content screening, cellular analysis and biochemical testing, in a $615 million cash transaction.

MDS expects to acquire all of the common shares of Molecular Devices for $35.50 a share. The merger agreement has been unanimously approved by the boards of both companies. MDS will begin a cash tender offer for all of the outstanding shares of Molecular Devices

The total purchase price is made up of $585 million to purchase outstanding shares plus $30 million to purchase outstanding stock options. Excluding normal one-time merger-related expenses, the transaction is expected to be modestly accretive in 2007. It is expected to be significantly accretive in 2008 and beyond.

The acquisition marks a significant expansion for MDS, the company said. It plans to create a new business unit that will combine the Molecular Devices and MDS Sciex businesses. It will be led by the current president of MDS Sciex, Andy Boorn, PhD, who will oversee its integration and management. The combined organization will have more than 1,100 employees, including more than 250 scientists and engineers.

In a conference call, MDS President/CEO Stephen DeFalco said, “What an exciting day for MDS. I’m thrilled to be speaking to you about this deal. We have discussed many times our strategy of making acquisitions to support our three core life sciences businesses — and this one is right in our sweet spot.”

He added, “This acquisition transforms Sciex from what is today a category killer in mass spectrometry to a much broader platform for growth.”

During the first year, DeFalco said the combined companies expect to add $190 million in revenues.

For the cash transaction, the money is expected to come from the MDS balance sheet, access to its revolving credit line and the “impending proceeds from the Diagnostics [division] sale,” DeFalco said on the call.

MDS reported in October signing an agreement to sell its Canadian laboratory services business, MDS Diagnostic Services, to Borealis Infrastructure Management (Toronto) in a C$1.325 billion transaction. MDS said at the time that the move was designed to shift the company’s focus to the life sciences market.

“One of the most exciting parts of this deal is access to the high-content screening market,” DeFalco said. “Screening is a $2.9 billion market, and the fastest-growing part of it is high-content, which is about a $300 million market, where Molecular Devices is tied for a first-place position.”

Also, he said, in addition to a very strong intellectual property portfolio, high single-digit organic growth and a track record of product innovation, Molecular Diagnostics brings “access to a direct sales and support team of over 230 people who are positioned in the most attractive life sciences markets around the world.”

By acquiring Molecular Devices, with its “strong brand recognition and leading-edge products and capabilities,” MDS said it will strengthen its leadership position as one of the top global providers of life sciences solutions. It will now offer systems that provide high-content screening, cellular and biochemical testing for leading drug discovery and life sciences laboratories in pharmaceutical, biotechnology, academic and government institutions.

Molecular Devices has an installed base of 100,000 instruments and markets its products globally through its sales and marketing offices in the U.S., UK, Germany, South Korea, China, Japan, Australia and Brazil.

MDS said it expects to realize cost synergies in the range of C$10 million to C$12 million (US$7 million) in fiscal 2007, primarily through the elimination of Molecular Devices’ public company costs, related corporate infrastructure and the opportunity to leverage “significant capabilities” across the combined global organization. In the four quarters ending Sept. 30, 2006, Molecular Devices reported revenues of $185 million and EBITDA of $38 million.

The transaction is subject to regulatory and other customary closing conditions and is expected to close in 2Q07.

Merrill Lynch & Co is financial advisor to MDS, while Ropes & Gray is serving as legal counsel to the company in this transaction. UBS Investment Bank is acting as exclusive financial advisor to Molecular Devices, with Cooley Godward Kronish as legal counsel.

In other dealmaking activity:

AngioDynamics (Queensbury, New York) reported completing its $220 million acquisition of Rita Medical Systems (Fremont, California).

In the deal, each share of Rita common stock was converted into the right to receive 0.1722 of a share of common stock of AngioDynamics and $0.515 in cash.

The purchase, which includes assumption of roughly $3.3 million in Rita’s net debt, was disclosed in November.

“This business combination is about growth, leadership and long-term value creation. AngioDynamics now stands as a leader in serving the needs of interventional radiologists, surgeons and other medical specialties with a compelling product portfolio of exciting technologies,” said Eamonn Hobbs, president/CEO of AngioDynamics.

Among the aspects of the deal that make sense, AngioDynamics said, is Rita’s position in vascular access ports which AngioDynamics sees as an ideal fit with its Morpheus CT PICC and the vascular access port technology it bought from Medron (Salt Lake City) last May. AngioDynamics also says it recently acquired irreversible electroporation (IRE) soft tissue ablation technology, expected for first sales in mid-2008, will complement Rita’s local oncology therapies.

Rita stock ceased to trading on the NASDAQ Global Market at the close of the market on Monday and will be delisted.

AngioDynamics manufactures devices used by interventional radiologists, surgeons and other physicians for minimally invasive diagnosis and treatment of peripheral vascular disease. Its product line includes angiographic products and accessories, dialysis products, vascular access products, PTA products, drainage products, thrombolytic products and venous products.