Fresh off its purchase of Instrumentarium, GE Medical Systems is proposing an even bigger acquisition: Amersham, the British developer of contrast agents. In an announcement released today, the companies said that GE would buy all outstanding shares of Amersham in an all-stock deal worth $9.5 billion.
GE will form a new GE Healthcare Technologies business unit to include the Amersham operations. The division will be led by William Castell, currently Amersham’s chief executive, and will be based in the U.K. Castell will lead the integration effort of the two businesses. Joseph Hogan will continue to lead GE Medical Systems, GE’s medical device business.
Adding Amersham to GE’s product mix will give the Milwaukee company access to a new high-growth portfolio of products, according to Jeffrey Immelt, CEO and chairman of GE. The deal will allow GE to accelerate development of molecular imaging techniques and "personalized medicine" that will make it possible to predict and treat disease with therapies tailored to individuals, he said.
If consummated, the deal would be a radical realignment of the medical imaging industry. To date, scanner vendors and contrast companies have maintained arms-length relationships, participating in product development deals but for the most part avoiding mergers or acquisitions (the one exception is Italian contrast firm Bracco, which owns MRI and ultrasound scanner vendor Esaote).
A GE/Amersham combination would give GE unprecedented reach in the medical imaging market, with the Milwaukee company able to offer a soup-to-nuts approach to radiology departments and imaging centers. GE/Amersham could offer lower prices to imaging facilities by bundling scanner sales with contrast contracts, and could win an edge in new product development due to the tighter integration of R&D for device and contrast products.
The deal could also lead to further consolidation in the imaging industry as other major players, such as Siemens Medical Solutions and Philips Medical Systems, seek contrast partners in order to keep pace with GE.
A combined GE/Amersham would have 2003 pro forma revenues of $13 billion. GE said the deal would be non-dilutive to 2004 earnings, and 1¢ accretive to earnings by 2004. The company expects to achieve revenue synergies of $350 million to $400 million by the end of the third full year of the deal, which will translate into operating profit synergies of $100 million to $200 million a year. GE said it expects the revenue synergies to come from access to new channels for each company’s products and services, channel efficiencies, accelerated global expansion, and new product introductions.
The company expects operating cost efficiencies of $300 million to $400 million per year by the third year, which represents 3% of the companies’ total cost base. These synergies are expected to come from improved sourcing, reduced general and administrative costs, and global infrastructure and operating efficiencies.
By Brian CaseyAuntMinnie.com staff writer
October 10, 2003
Related Reading
GE rumored to be courting Amersham, October 10, 2003
GE closes Instrumentarium deal, October 9, 2003
Visipaque sales surge at Amersham, August 6, 2003
U.S. approves GE’s purchase of Instrumentarium, September 17, 2003
Photogen claims favorable European ruling in Amersham suit, August 5, 2003
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