In a move designed to boost its position in women's healthcare, Hologic Inc. (Bedford, MA) announced its intention to purchase Cytyc Corp. (Marlborough, MA) in a cash and stock transaction valued at about $6.2 billion. The new company will operate under the Hologic name, with Cytyc becoming a wholly owned subsidiary.
The deal was unanimously approved by the boards of both companies, though it still must pass muster with stockholders and antitrust regulators. The deal is widely expected to close sometime in the third quarter.
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 common stock they own. Based on the companies' closing stock prices at the time of the announcement, the deal represents a premium of about 33%.
Hologic chairman and CEO Jack Cumming described the deal as a perfect fit. “By combining our companies' complementary best-in-class products and technologies, we expect to drive enhanced growth and value creation,” he said. “Both Hologic and Cytyc have a track record of successfully executing on strategic transactions, and we expect to realize the benefits of this combination quickly and efficiently.”
Remaining as chairman.
Cytyc's chairman, president, and CEO, Patrick Sullivan, said, “This is a great transaction that provides Cytyc shareholders with enhanced value both today and over the long term. The upside potential we see as a result of our combination is compelling. We believe this transaction enables both Cytyc and Hologic to reach our shared goal of improving women's health through earlier and better detection, improved diagnosis, less-invasive treatment, and improved outcomes more quickly.”
Cumming will remain CEO in the newly formed company, with Sullivan assuming the post of chairman.
According to a joint press release announcing the deal, the combined company will have more than 3300 employees and direct operations in more than 20 countries. Benefits cited for the merger include the creation of a comprehensive women's health product portfolio with the largest channel coverage in the sector, expanded international presence with product distribution in more than 125 countries, increased cross-selling opportunities generating more than $75 million within the first three years, and estimated annual cost savings of between $25 million and $30 million.
Hologic manufactures diagnostic and medical imaging systems focusing on the healthcare needs of women, including digital mammography, breast biopsy, and osteoporosis assessment. Hologic's Selenia full-field digital mammography systems represent one of the company's fastest growing product lines. Overall, sales of mammography systems account for 75% of Hologic's total revenues.
Cytyc Corp. manufactures both diagnostics and surgical products geared to cancer and women's health, including cervical cancer screening, preterm birth screening, treatment of excessive menstrual bleeding, and radiation treatment of early-stage breast cancer and malignant brain tumors. The company's dominant product is its ThinPrep cervical cancer screening system. However, the market for this product is a fairly mature one, and it currently faces the potential for a downturn, as recent studies have suggested that Pap smear tests may not be needed as often as was previously recommended. On the upside, the company's device business continues to post increases, much of it coming from its NovaSure System, an endometrial ablation device for treating menorrhagia, or excessive menstrual bleeding.
Industry analysts generally applauded the acquisition announcement, with several suggesting that the deal was yet another indicator of the consolidation occurring in the diagnostics sector.
With more than 1600 employees, Hologic reported annual revenues of $462.7 million for the fiscal year ending on September 30, 2006—an increase of 61% over year-earlier revenues of $287.7 million.
Cytyc has about 1500 employees and posted annual revenues of $608.3 million for the year ending on December 31, 2006, a 20% increase over 2005 revenues of $508.3 million.
The newly combined company expects to generate $1.7 billion in revenue for fiscal year 2008.
© 2007 Canon Communications LLC