Philips to Acquire Intermagnetics

In a $1.3 billion deal, Royal Philips Electronics (Amsterdam, The Netherlands) has agreed to acquire Intermagnetics General Corp. (Latham, NY), a manufacturer of superconducting magnets used in magnetic resonance imaging (MRI) systems. Intermagnetics employs about 1150 people and reported more than $250 million in sales for fiscal 2005. Following the merger, its headquarters will become the global headquarters of Philips' magnetic resonance business.

In addition to manufacturing superconducting magnets, Intermagnetics provides specialized MRI-compatible patient monitoring devices and radiofrequency (RF) coils, which are predominantly supplied to hospitals. Through the merger, Philips will also gain control of SuperPower Inc., a wholly owned subsidiary of Intermagnetics that develops electric power components including underground transmission and distribution cables, transformers, and fault current limiters.

“In the short term, we expect to gain equipment market share and to grow the installed base by expanding our product offerings with an accelerated innovation rate and a lower-cost supply chain,” said Jouko Karvinen, member of the Philips board of management and CEO of Philips Medical Systems. “Intermagnetics' leading positions in the high-growth and high-value markets of radiofrequency coils and MRI patient monitoring will enable us to build unique solutions for our customers. In the longer term, we believe that MRI technology will become important in molecular imaging, therefore positioning us well for the future.”

“Our board of directors unanimously feels that this is the logical next stage for Intermagnetics,” said Glenn H. Epstein, chairman and CEO of Intermagnetics. “We will now be better positioned to align our core strengths in the design and manufacture of superconducting magnets, RF coils, and MRI-compatible patient monitors with Philips' deep expertise in MRI system design and clinical applications.”

Upon completion of the merger, Epstein will join Philips to lead the MRI business and the integration process, the companies report.

Currently, Philips represents Intermagnetics' largest customer. According to company filings, Philips Medical Systems accounted for 52% and 51% of Intermagnetics' sales in fiscal years 2005 and 2006, respectively. According to reports, this percentage was significantly higher in previous years—as high as 92% in fiscal 2003.

Intermagnetics cites this existing relationship as a key factor considered by its board when evaluating the merger. According to company filings, another key consideration was “ the continued uncertainty regarding whether SuperPower could develop viable products and manufacture them in a timely and cost-effective manner such that they could be adopted by the electric utility industry.” Board members also took into account other risks of remaining independent, including “the long-term impact on the overall medical device market of Medicare reform efforts.”

The merger, which is subject to regulatory approval and Intermagnetics shareholder approval, is expected to close by the end of 2006.

© 2006 Canon Communications LLC

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