Acquisition will particularly strengthen Beckman’s presence in clinical chemistry market

Monday, March 2, 2009

Last Friday, Beckman Coulter Inc. (NYSE:BEC) announced that it will pay $800 million acquire the diagnostics business of Olympus Corporation. This is a major transaction that further consolidates the in vitro diagnostics (IVD) industry, particularly given the respective market shares in clinical chemistry currently held by both Beckman and Olympus.

A Japanese firm headquartered in Tokyo, Olympus Diagnostics is recognized as a leader in clinical chemistry and holds strong market share among high-volume laboratories worldwide. The $800-million deal puts Beckman Coulter, a developer and manufacturer of diagnostic testing products, in the driver’s seat globally for the clinical chemistry business.

The acquisition adds a valuable customer set to Beckman Coulters’s immunoassy product business. Beckman is telling Wall Street that it expects a revenue boost next year of approximately $500 million, with an increase to operating income of $40 to $50 million. Beckman Coulter predicts to recover about two-thirds of the entire purchase price by the end of 2010.

Beckman Coulter will finance the deal with about $300 million in newly issued common stock and new debt of approximately $500 million, but under the agreement can deliver up to 37.5% of the purchase price in Beckman Coulter stock. The transaction, which is subject to customary government approvals, is expected to close the third quarter of 2009.

Pathologists and lab administrators in the United States should not also overlook another benefit to Beckman Coulter from this acquisition. Olympus has strong relationships in many of the fastest-growing countries in Asia. Beckman will be able to leverage these relationships to sell its other IVD tests and systems. Thus, it has the potential to cross-sell its other product lines to clinical laboratory customers in some of the most populous and fastest-growing countries in the world.

Finally, Dark Daily notes that this transaction may be a trigger that sets off other acquisition activity within the IVD industry. Often, when an acquisition like this one between Beckman Coulter and Olympus occurs, it motivates competitors to do their own acquisitions as a way to protect their market position. -PK

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