The diagnostics sector has two levels – a handful of Goliaths in one group, a multitude of Davids in the other.
Industrial conglomerate Siemens (Munich, Germany) last week could claim expanded Goliath status in the human testing space – No. 2 to Roche Diagnostics (Basel, Switzerland) – with a blockbuster-style consolidation. It agreed to acquire Bayer Diagnostics (Tarrytown, New York), the diagnostic unit ofBayer AG (Leverkusen, Germany),for $5.3 billion.
After-tax proceeds to Bayer are expected in the range of about $3.6 billion.
For Siemens, the acquisition provides a strong complementary fit to its purchase, in April, of Diagnostic Products Corp. (DPC; Los Angles) for $1.68 billion (Medical Device Daily, April 28, 2006). The company said that with the additions of DPC and the Bayer unit it will garner the No. 2 position in immunodiagnostics worldwide.
In unveiling its part of the deal, Bayer said the spin-off is intended to reduce debt and refocus its health division. “We are concentrating on pharmaceuticals for both humans and animals, and products that can be promoted directly to patients,” said Bayer CEO Werner Wenning. The company noted that its diabetes business as well as Schering's contrast agents business were not included in the Siemens transaction.
The deal supports financing of Bayer's takeover of Schering (Berlin) for about EUR 3.7 billion (MDD, June 15, 2006).
But Wenning also said the motive for the spin-off was “part of the consolidation phase in the diagnostics market – we are convinced that the successful laboratory equipment business has even better long-term development prospects in a company specializing in medical technology” – such as Siemens.
Dr. Klaus Kleinfeld, president/CEO of Siemens, said, “Demographic change is greatly increasing global demand for healthcare services and thereby generating excellent growth opportunities for Siemens,” and he touted the acquisition of Bayer Diagnostics as part of the company's strategy “to create the healthcare industry's first integrated diagnostics company by combining the entire imaging diagnostics, laboratory diagnostics and clinical IT value chain under one roof.”
Kleinfeld also noted that this acquisition targets “promising growth fields,” driven by worldwide demand and aging demographics.
A company statement said the acquisition also allows it “to tap the rapidly growing market for molecular diagnostics based on gene analysis [nucleid acid testing]. Bayer Diagnostics is also a world market-leader in clinical chemistry with a leading position in near-patient testing, laboratory automation and hematology [blood cell diagnostics].”
Dr. Erich Reinhardt, president of Siemens' Medical Solutions Group and member of the Siemens managing board, said, “Molecular medicine is becoming increasingly important since it enables healthcare professionals to identify the causes of disease using genetic profiles. With the help of molecular medicine, it will be possible not only to predict the effects of the medications selected and tailor treatment for individual patients, but also to diagnose disease at an early stage.”
The DPC purchase, he said, “has provided us with access to laboratory diagnostics. With the acquisition of Bayer Diagnostics, we will now have a comprehensive portfolio in this key future-oriented market. These deals will enable us to considerably expand our range of expertise and further our leading position as a trendsetter in healthcare.”
The sale – approved the evening of June 29 by Bayer's supervisory board and subject to various approvals – is slated to close in the first half of 2007.
In 2005, Bayer's diagnostics operations posted EUR 1.4 billion in sales. It employs 5,000 people worldwide.
In other dealmaking activity:
• Bruker BioSciences (BRKR; Billerica, Massachusetts) reported that its shareholders, at the company's annual meeting, approved the purchase of molecular spectroscopy company Bruker Optics (Billerica) for $135 million, to be paid approximately 59% in cash and 41% in BRKR stock.
The deal, first unveiled in April, will involve paying about 59% in cash and 41% in BRKR stock.
The acquisition had previously received unanimous approval by a special committee of independent directors of the board of Bruker BioSciences, as well as by all independent directors, with the non-independent BRKR directors recusing themselves from the vote. The agreement had also been unanimously approved previously by the board of Bruker Optics.
All proposals were approved with “overwhelming majorities” by the BRKR stockholders, the company said. In particular, the proposal requesting approval of stockholders for the acquisition of Bruker Optics was approved by greater than 99% of the BRKR shareholders not affiliated with the controlling shareholders of BRKR who voted at the meeting.
Frank Laukien, president and CEO of BRKR, said, “I am very pleased to receive this clear vote and mandate from our non-affiliated shareholders to move forward with the acquisition of Bruker Optics, which is now expected to close in early July 2006. Bruker Optics . . . should allow us to expand our market reach, increase our critical mass and accelerate our drive to grow our profitability and cash flows.”
Bruker BioSciences is the parent company of Bruker Daltonics and Bruker AXS. Bruker Daltonics is a provider of life science tools based on mass spectrometry, and also offers nuclear, biological and chemical detection products for homeland security. Bruker AXS is a developer and provider of life science, materials research and industrial X-ray analysis tools.
• Thermo Electron (Waltham, Massachusetts) report-ed acquiring EGS Gauging (Wilmington, Massachusetts), a manufacturer of measurement and control instruments for web process applications in the plastics processing and converting industries. The company said that the acquisition enables Thermo to enhance its gauging portfolio for web processing applications. Terms of the deal were not disclosed.
Thermo Electron is a leader in making analytical instruments, its Life and Laboratory Sciences segment providing analytical instruments, scientific equipment, services and software solutions for life science, drug discovery, clinical, environmental and industrial laboratories.