Kodak bolsters CR position with bid for Orex

Jan 17, 2005

Moving to expand its reach into specialty markets, Eastman Kodak Health Imaging has signed an agreement to purchase Israeli computed radiography developer Orex Computed Radiography for approximately $50.5 million in cash.

For Kodak, the deal is part of the firm's vision of building its presence in specialty sectors, said Kevin Hobert, general manager of the Rochester, NY-based vendor's digital capture business. Orex provides its compact CR technology for specialty markets such as orthopedics, imaging centers, veterinary applications, and dentistry, as well as for in-room CR applications for hospitals.

"Their technology helps us to round out our (CR) product line, and they also have extensive channels and brand in these (specialty) areas," Hobert said. "There are other products that we have that are complementary, and so the relationship with the customers that they've established in these specialty markets is also attractive to us."

In addition, Kodak has technology that can complement Orex's reader, including screens and image processing technology, Hobert said.

For Orex, the acquisition provides the company with the large strategic partner it had sought to ensure continued growth, said Karen Sarid, COO and general manager of Orex.

"Staying as a standalone company in a competitive market like we are in in CR is not an easy task," she said. "Joining forces with Kodak can also enhance our products that we are selling into different distribution channels, as well as give us some other products that can enhance our scanner."

After closing of the deal, Sarid will continue on as general manager of the new wholly owned Kodak subsidiary.

Future sales activities between the companies will be worked out as part of the integration planning process, which is just beginning, Hobert said.

"We intend to grow both businesses, so we want to grow sales of the Orex products with some of the things that we bring to the table, and we also want to sell more Kodak products such as printers to the current Orex channels," he said. "So we're not looking to do some big channel rationalization, because that's not what this is about. This is about growth."

The addition of the Orex reader to the CR portfolio will not precipitate a discontinuation of any other Kodak technology, Hobert said.

Orex began its corporate life in 1996 as Digident, focusing initially on dental CR. In 2001, the firm grew its product line to expand into broader specialty medical markets. Orex has 84 employees worldwide, and will remain based in Yokneam, Israel, operating as a wholly owned subsidiary of Kodak Health Imaging.

Orex president and CEO Hillel Bachrach will remain on for a period of time to assist with the transition, and to aid Kodak with some entrepreneurial projects, Hobert said. Orex founder and chief technology officer Jacob Koren will take on a broader technology role within Kodak's digital capture business.

The deal is subject to regulatory and other approvals, and will likely close by the end of the first quarter. Kodak expects Orex will contribute approximately $32 million to Kodak's revenue in 2005, and will be earnings neutral in 2005 and accretive thereafter.

Orex produced approximately $28 million in revenue in 2004. Almost 4,000 Orex units have been installed around the world. The U.S. military has purchased 250 of those units, according to the companies.

Orex also provides its CR systems for nondestructive testing (NDT) applications. Those activities will continue, with Kodak's NDT unit providing marketing support.

By Erik L. Ridley
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