llumina (San Diego) and Solexa (Hayward, California) reported that they have entered into a definitive merger agreement under which Illumina will acquire Solexa in a stock-for-stock merger valued at $600 million.

Under the merger agreement, unanimously approved by the boards of both companies, Solexa’s stockholders will receive, subject to certain “collar” provisions, shares of Illumina common stock valued at $14 per Solexa share. The exchange ratio will be set at closing, according to Illumina President and CEO Jay Flatley.

In addition, Illumina has entered into a definitive securities purchase agreement with Solexa in which it has agreed to invest an additional $50 million in Solexa in exchange for newly issued Solexa shares, subject to customary closing conditions.

Flatley said during a conference call, that he believes the transaction “creates a powerful life sciences franchise,” saying that Solexa is a “natural” addition to its business, because it allows for sequencing at lower costs.

Solexa, which has “substantial operations” in Cambridge, UK, has developed a “next-generation” genetic analysis system for use in whole genome sequencing, targeted resequencing, digital gene expression and microRNA analysis, it said.

Flatley said that the Illumina 1G Genome Analyzer is ideally suited for looking for gene variations, or single nucleotide polymorphisms (SNPs), and that sequencing and genotyping are “closely related techniques.”

By identifying SNPs, the hope is that this could lead to genetic markers, and the ultimate goal for such markers is to be validated for clinical diagnostics to allow for “early detection of mutant cells that are clearly indicators of disease.”

“Sequencing will be the application of choice in developing clinical diagnostics,” Flatley said.

The market opportunity in sequencing is estimated at $1 billion, creating a market opportunity for the combined company in excess of $2.25 billion, the companies said. Together, Illumina and Solexa will create the only company with genome-scale technology for genotyping, gene expression and sequencing, the three cornerstones of modern genetic analysis, they said.

“Illumina is at the forefront of advanced genetic analysis, with the goal of providing the tools to understand the molecular basis of disease. This transaction adds next generation sequencing to our core technologies, allowing us to integrate the essential applications in modern genetic analysis,” said Flatley. “This unique genetic analysis portfolio addresses the fastest growing segments of the life sciences market and will speed our customers’ quest to understand, cure and ultimately prevent disease.”

Illumina and Solexa anticipate that the 1G Genome Analyzer and future products will enable researchers to conduct whole genome resequencing, targeted resequencing and other applications at unparalleled throughput and costs, much as Illumina’s BeadArray products have revolutionized the genotyping field, the companies said.

That combination is expected to accelerate the commercialization and market expansion of the 1G through Illumina’s worldwide direct sales and support network. Additionally, it will expand Illumina’s penetration into complementary markets, similar to how its acquisition of CyVera provided access to the lower multiplex, clinical diagnostics marketplace.

John West, CEO of Solexa, who will be joining Illumina as senior vice president and general manager of the Sequencing Business, said: “This transaction is expected to provide significant benefits to Solexa stockholders, customers and employees. “

West said he expects that the combined company will “reach and exceed the milestone of the $100,000 genome.”

Solexa stockholders, option holders and warrant holders will receive newly issued shares of Illumina common stock, options and warrants, respectively, for their Solexa shares, options and warrants.

Illumina said it expects to maintain Solexa’s operations in both California and Cambridge, and two members of Solexa’s board will be joining Illumina’s board, Flatley said.

In other dealmaking news:

• Tm Bioscience (Toronto), a diagnostics company developing a suite of DNA-based tests for genetic disorders, drug metabolism (pharmacogenetics) and infectious diseases, reported that its board has initiated a process to explore strategic alternatives to enhance shareholder value, including, but not limited to, the sale or merger with another entity offering strategic opportunities.

The board has established a special committee of directors to review, consider and analyze potential strategic opportunities. The company also has retained the investment banking firms Leerink Swann & Company (Boston) and Westwind Partners (Toronto) as financial advisors in this process.

The company also said it does not plan to disclose the results of this search effort unless and until its board approves a specific transaction.

• Bovie Medical (Melville, New York), a maker of electrosurgical products, said that it has acquired assets of Lican Developments , (Windsor, Ontario). The assets acquired include patent pending technologies, working prototypes in various stages of development and production equipment. Lican is a product development and manufacturing company focused on endoscopic devices.

Terms of the acquisition include $350,000 cash payable over 5 years, a total of 350,000 restricted Bovie common shares subject to American Stock Exchange guidelines, of which 200,000 restricted shares contain vesting provisions, and 150,000 restricted shares are conditioned upon the achievement of specified developmental and regulatory benchmarks. Bovie anticipates revenues from the acquisition during the first half of 2007.

Bovie will be forming a wholly owned subsidiary, Bovie Canada, that will continue the further development of these technologies as well as manufacturing the new devices and other Bovie products. Steve Livneh, president and founder of Lican, will assume the position of president of Bovie Canada.

Bovie Canada features manufacturing equipment such as computerized multi-axis machinery, micro-laser welding equipment and electro-discharge drilling machinery.