Chiron Corp. moved to expand its vision-related business by agreeingto pay $95 million to acquire the ophthalmic surgical division ofIOLAB, a Johnson & Johnson subsidiary.
IOLAB will be merged with Chiron Vision and the two units'combined global operations will be restructured over the next twoyears.
"We're taking two marginally unprofitable businesses and combiningthem to achieve economies of scale through cost reductions," saidLarry Kurtz, vice president of corporate communications for theEmeryville, Calif.-based Chiron.
Chiron Vision, of Irvine, Calif., and IOLAB, of Claremont, Calif.,were competitors, each generating 1994 sales of $100 million forsuch products as intraocular lenses and cataract surgery supplies.
Kurtz said Chiron will pay $55 million in cash up-front for IOLAB.The remaining $40 million will be in the form of a note carried byJohnson & Johnson, of New Brunswick, N.J. Kurtz said terms of theloan were not disclosed.
The acquisition, which has cleared U.S. regulatory approvals, isexpected to close by March 31.
IOLAB's ophthalmic surgical division was one-half of the company'soperations. Its pharmaceutical division was acquired by Switzerland-based Ciba-Geigy in 1994. Last year Ciba also purchased a 49.9percent interest in Chiron for $2.1 billion.
Whereas Chiron Vision has concentrated on surgical aspects of theophthalmic market, Ciba Vision has focused on the non-surgicalportions. Kurtz said both company's likely will collaborate onprojects with some agreements expected this year.
Chiron's acquisition of IOLAB's surgical division is the first majorpurchase by Chiron since it entered the strategic alliance with Ciba inNovember 1994. The deal included Ciba giving Chiron access to$1.2 billion in cash. However, Kurtz said the IOLAB acquisition wasaccomplished with money from Chiron's reserves.
In combining the two businesses, the merged companies will beheadquartered at IOLAB's offices in Claremont. Kurtz said theIOLAB will cease to be a corporate entity, but will continue as aproduct name.
Chiron (NASDAQ:CHIR) closed Tuesday at $57.50, up 25 cents. n
-- Charles Craig
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