Diagnostics & Imaging Week Associate

In what is one of the largest device sector deals yet this year, Royal Philips Electronics (Amsterdam, the Netherlands) reported that it has signed a definitive agreement to acquire Intermagnetics General (Latham, New York) for $27.50 per share or a total equity value of about $1.3 billion (EUR 1 billion) to be paid in cash upon completion.

The board of directors of Intermagnetics has unanimously approved the proposed transaction. Completion of the transaction is subject to regulatory approval, to the terms and conditions of the merger agreement and to the approval of Intermagnetics shareholders.

Intermagnetics makes high-field superconducting magnets used in MRI systems, and is viewed as one of the technological innovators in this market. It also provides specialized MRI-compatible patient monitoring devices and radio frequency (RF) coils that are predominantly supplied to hospitals.

Philips said the acquisition would strengthen its position in the key MRI market. The company added that the buy will allow it to "significantly rationalize" its supply chain, to enhance its competitive position and to participate in the fast growing market for RF coils.

This latest buy is one in a recent string for Philips. In 2005, the company bought Stentor (Brisbane, California) for $280 million to strengthen its position in the fast-growing market for clinical information technology. It also recently acquired Lifeline Systems (Framingham, Mass-achusetts) for $750 million to strengthen its consumer health business.

While the company has been on a bit of a buying spree, executives at the company have publicly stated that the M&A route is not its preferred method of adding to the company's portfolio.

At a the Frost & Sullivan Executive Summit meeting held in San Francisco in March 2005, Paul Smit, senior vice president, strategy and business development for Philips Medical Systems (Best, the Netherlands/Andover, Massachusetts), said the company's culture "is to go with an alliance first, or a joint venture." He said Philips looks at mergers and acquisitions as "the last and most difficult path to building value."

That being said, Smit noted that when Philips does look at a company as a possible acquisition target, "we like it to be complementary to what we do. We look at companies that serve the same customers as we do, but with a different technology."

It would appear that this latest buy fits in nicely with the company's buying strategy.

"Through this acquisition, we will greatly strengthen the overall performance and innovation capability of our MRI business," said Jouko Karvinen, a member of the Philips board of management and CEO of the Medical Systems business. "In the short term, we expect to gain equipment market share and to grow the installed base by expanding our product offerings with an accelerated innovation rate and a lower cost supply chain. Intermagnetics' leading positions in the high-growth and high-value markets of RF coils and MRI patient monitoring will enable us to build unique solutions for our customers," he added. "In the longer term, we believe that MRI technology will become important in molecular imaging, therefore, positioning us well for the future."

Philips said it also recognizes the benefits offered by the breakthrough technology of SuperPower, Intermagnetics' Energy Technology subsidiary, and will actively consider the most effective way to achieve its potential.

The company said it anticipates the Intermagnetics transaction to be accretive to its operating margin towards the end of 2007. There will be a one-time charge of about EUR 85 million ($107.25 million) related to in-process R&D expenses, integration of supply chain and various purchase accounting items, taken in the latter half of 2006. For the last four quarters ended Feb. 26. Intermagnetics' revenues were $304 million.

Intermagnetics employs about 1,150 people. Its headquarters in Latham, New York will become the global headquarters of Philips' enlarged Magnetic Resonance business.

Glenn Epstein, chairman and CEO of Intermagnetics, will join Philips to lead the MRI business and the integration process. He will report to Steve Rusckowski, CEO of Philips Medical Imaging Systems.

In other dealmaking news:

• Positron (Houston), a manufacturer of positron emission tomography (PET) systems, reported completing the purchase of IS2 Medical Systems (IS2; Ottawa, Ontario), a manufacturer of nuclear imaging devices.

Through a majority-owned subsidiary, Imaging PET Technologies (IPT), formed in a joint venture with Quan-tum Molecular Pharmaceuticals, a Canadian radiopharmaceutical company, Positron acquired all of IS2's assets in a transaction negotiated with IS2's secured debtholders. Terms were not disclosed.

IS2's flagship product is its PulseCDC compact digital cardiac camera, providing high-quality images, Positron said, "at the lowest price in the industry." It noted that IS2's scientific team offers "more than 125 years of expertise in nuclear medicine, physics, mathematics and engineering."

Positron's investment to purchase IS2, it said, is its first transaction from proceeds of its recent financing targeting expansion of its cardiac camera and clinic businesses. Positron said it would benefit from IS2's "top-tier technical resources, marketing expertise and credibility in the nuclear medicine marketplace."

Joseph Oliverio, president of Positron, said the companies "will integrate select resources and expertise . . . [for] increased sales, greater software development capabilities, more efficient and effective marketing and R&D budget and to the ability to meet the production timelines that both companies sales cycle demands. We are ideally positioned to execute our business plan and take a leadership role in nuclear medicine."

Steve Horvath, president of IS2, said the transaction would be a catalyst to develop "new technologies in PET, cardiac and general purpose imaging as well as the development of specialized technologies including breast, brain, and prostate imaging."

Positron's POSICAM systems incorporate technology for the diagnosis and treatment in cardiology, oncology and neurology, with units installed at several leading medical facilities.

IS2 reports double-digit revenue growth "for multiple years" through sale of its PULSECDC small-footprint cardiac camera, reporting more than 150 cameras sold in the U.S., Canada, Europe and Asia.

• Kroll Laboratory Specialists (New Orleans), the substance abuse testing subsidiary of Kroll (New York), a risk consulting company, reported completing the acquisition of Express Analytical Laboratory (EAL; Marion, Iowa), a privately-held SAMHSA-certified laboratory. The purchase price was not disclosed.

"The acquisition of EAL represents a continuation of our strategy to acquire and consolidate key laboratories and Point of Collection Testing distributors, reinforcing our industry leadership and expanding our market share in the Midwest," said John Peterson, president of Kroll Laboratory.

Kroll Laboratory said the acquisition is its 14th since 1994, and the second since last year, when it gained an additional SAMHSA-certified laboratory, Scientific Testing Laboratory (Richmond, Virginia).

EAL, founded in 2001 by Carolyn Cooper, its president, provides substance abuse testing services to Midwest-based clientele.

Kroll Laboratory, a subsidiary of Kroll since 1998, says it is now one of the top five substance abuse testing companies in the U.S.

• Axeda (Foxboro, Massachusetts) reported that Ventana Medical Systems (Tucson, Arizona) has licensed Axeda software for its new CareGiver remote support program.

The program will support Ventana's recently launched Symphony one-touch H&E slide preparation system, a primary staining system for use in clinical histology and drug discovery laboratories. Terms of the licensing were not disclosed.

Dave Flaten, vice president/general manager, Ventana, said that the Axeda technology "allows us to capture instrument data, while maintaining HIPPA compliance. The solution also allows us to retain a full audit trail of all activities on the system, which is a capability not available on standard remote access products."

Dale Calder, president and CEO of Axeda, said, "Ventana joins more than 20 medical/life sciences customers who use the Axeda platform as their remote service foundation."

Ventana manufactures instrument/reagent systems that automate slide preparation and staining in clinical histology and drug discovery laboratories worldwide.

Axeda, founded in 2000, bills itself as the leader in the market for enterprise software enabling high-value remote services.

• The Cirrus Group (Dallas) has acquired Plano Pediatric Medical Pavilion (PPMP). PPMP, a multi-specialty pediatric medical office complex in Plano, Texas, currently houses a surgical center, a diagnostic imaging center, an urgent care center and other physician practices focused entirely on pediatric care.

Plano Pediatric Medical Pavilion is a two-story, 82,000-square-foot, Class A medical office building.