Hologic of Bedford, MA, made an aggressive move to expand into new sectors of the women's health market by announcing an agreement to acquire Cytyc, a Marlborough, MA, firm that makes Pap smear tests and other women's health products.
Under the terms of the deal, Cytyc shareholders will receive 0.52 shares of Hologic common stock and $16.50 in cash for each share of Cytyc stock that they own, representing a premium of 33% for Cytyc shares based on the stock's Friday close. The total value of the deal is $6.2 billion.
The combined company will be called Hologic, with Cytyc chairman, CEO, and president Patrick Sullivan becoming Hologic's chairman, and Hologic chairman and CEO Jack Cumming retaining the CEO position. The company's board will be comprised of 11 members, with six nominated by Hologic and five nominated by Cytyc. Hologic will maintain its headquarters in Bedford and Cytyc's offices in Marlborough.
When taken as a combined company, the firm generated $1.44 billion in sales in the last quarter on an annualized basis, and $436 million in earnings before interest, taxes, depreciation, and amortization (EBITDA). The company will have $2.3 billion in debt at the close of the deal, which is expected to be completed in the third quarter of 2007.
Hologic executives cited a number of benefits behind the deal. Both firms are about the same size and share similar corporate cultures, and although they both participate in the women's health market, there is little overlap in product lines.
Hologic has concentrated on medical imaging technologies, such as its bone densitometry line, Lorad Selenia full-field mammography systems, Suros breast biopsy devices, and R2 computer-aided detection products. Meanwhile, Cytyc has a number of product lines focused on diagnostics and therapies, including the ThinPrep Pap test, NovaSure endometrial ablation technology, and FullTerm fetal fibronectin test for detecting possible preterm pregnancies.
A horizontal move
Hologic has expanded aggressively in recent years, with the acquisitions of Suros and R2 being major recent milestones. The company had been looking at its options for future growth, and decided that a "horizontal" move within women's health made more sense than "vertical" expansion that might have moved the company into new markets in radiology, according to CEO Jack Cumming.
"When we looked at our road map for growth, we wanted to grow horizontally," Cumming said. "Vertically, we've grown as much as we can in our sector. We looked at options within imaging, but we are not going to go into PET/CT."
Likewise, Cytyc had been trying to find a way to expand into the mammography market. The companies' paths had been crossing frequently of late, and Cumming and Sullivan even live in the same city.
Hologic believes the deal moves the company's center of gravity closer to ob/gyn physicians, who the firm sees as being the primary gatekeepers in women's health. Ob/gyn physicians treat and provide advice to women on a wide range of health issues, from osteoporosis to Pap smears to mammography tests. The deal also gives Hologic access to a breast cancer therapy option, thanks to Cytyc's MammoSite partial-breast balloon brachytherapy device.
The new Hologic will also have a much larger sales force, with 425 salespeople in the U.S. alone who are interacting with women's health physicians at multiple points. The combined company will have nine products with leading market shares in the women's health market, according to Cumming. Cytyc has also been active internationally, with operations in 20 countries and 150 salespeople in Europe.
Hologic president and chief operating officer (COO) Rob Cascella sees the deal as expanding on Hologic focus on women's imaging to become being a comprehensive women's health company.
"We have a complement of products now that will meet the requirements of women throughout many phases of their life," Cascella said. "It really is an extraordinary fit, with (Hologic) becoming the largest women's health company in the world covering all forms of diseases that afflict women."
By Brian Casey
AuntMinnie.com staff writer
May 21, 2007
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