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Closing the gaps
ORANGE COUNTY, Calif.—In a move that will expand Beckman Coulter Inc.'s global position in clinical chemistry and fill in some gaps in its services offerings, the company will acquire the diagnostic systems portion of Tokyo-based Olympus Corp.'s Life Sciences business for 77.45 billion yen, or approximately $800 million.
According to Scott Garrett, Beckman Coulter's chairman, president and CEO, this acquisition will broaden his company's chemistry offering substantially as well as broaden the chemistry customer base.
"This compelling transaction combines the chemistry product lines of our two companies into a complete chemistry systems offering," Garrett says. "It enhances Beckman Coulter as a leading provider of chemistry products with additional opportunities to expand our immunoassay reach into their chemistry installed base. Customers will benefit from the expanded range of products, particularly those large hospital and university laboratories where higher throughput systems are preferred. In addition, Beckman Coulter's strength in total lab automation will be complemented by Olympus' strong pre-analytical automation position in Europe and Asia."
The overriding reason to make the deal, notes Mary Luthy, a spokesperson for Beckman Coulter, was to fill gaps in the company's chemistry product line.
"We already had a great market presence in U.S. labs, and our 'sweet spot' was in mid- to high-volume labs," she explains. "Olympus, though, has an analyzer that speaks to the needs of ultra-high-volume labs like reference labs and university labs, and they also have a good solution at the low end, below where we currently have product offerings."
Now, Luthy says, Beckman Coulter has coverage across virtually all testing volumes, and this puts the company into a truly competitive position with Roche Diagnostics.
"This deal really sets us up for continued and wider leadership in biomedical testing," Luthy says.
In 2010, the Olympus Diagnostics business is anticipated to increase Beckman Coulter's revenue by approximately $500 million on a full-year basis and generate approximately $40 million to $50 million in operating income (excluding FAS141R associated amortization). Beckman Coulter believes that 2010 pre-tax savings of between $50 million and $60 million can be achieved from the combination of Olympus operating expenses of about $200 million and Beckman Coulter operating expenses of more than $1 billion. Savings are expected to be realized from leveraging existing global infrastructure and integrating sales, service, administrative and research and development activities. Excluding amortization costs related to FAS141R, a new standard guiding accounting for acquired businesses, the company believes that the acquisition will be substantially accretive to earnings in 2010.
As part of the agreement, Beckman Coulter has the right to deliver up to 37.5 percent of the purchase price in the form of Beckman Coulter stock. As such, Beckman Coulter expects to finance the acquisition with a combination of newly issued Beckman Coulter common stock totaling about $300 million and newly issued debt on the order of $500 million. The company does not anticipate a change in its current investment grade ratings.
"We remain focused on creating shareholder value through growth, quality and operating excellence. The combination of Beckman Coulter and Olympus demonstrates our commitment to further expand chemistry and sustain our above-market growth in immunoassay," Garrett says. "A foundation of stable markets, a defensive business model, well-recognized competencies in optimizing lab processes and an unyielding commitment to quality positions us for continued leadership in biomedical testing."
The transaction is expected to close in the third quarter of 2009 and is subject to customary government approvals, the finalization of certain ancillary agreements and the disclosure schedules, as well as other customary conditions.