Hologic has made big-money acquisitions before, and today it’s making another sizable one.
The Bedford, MA-based maker of women’s health products (NASDAQ: [[ticker:HOLX]]) said today it has agreed to purchase San Diego-based Gen-Probe (NASDAQ: [[ticker:GPRO]]), a molecular diagnostics company, for $3.7 billion, or $82.75 a share. The price represents a 20 percent premium over Gen-Probe’s Friday closing value of $68.71.
Hologic said the deal is expected to be completed in the second half of 2012, and that it will boost earnings per share by 20 cents in the first fiscal year. The company said it expects to squeeze out $75 million in cost savings through combining the companies, but didn’t say how it plans to do that, and today’s statement didn’t say anything specific about how many employees may end up at the combined company. Hologic had a little over 5,000 employees entering this year, while Gen-Probe had almost 1,400, according to its most recent annual report. Hologic CEO Rob Cascella will remain CEO of the combined company, while Gen-Probe CEO Carl Hall will oversee the combined diagnostics business, according to a statement. The Hologic headquarters will remain in Bedford, MA, and it said it will keep “a significant presence” in San Diego.
Initial reactions to the deal on Wall Street were mixed. Hologic shares fell more than 10 percent on the news.
By acquiring Gen-Probe, Hologic gets the market leader in chlamydia/gonorrhea testing and in HIV/Hepatitis C Virus/Hepatitis B Virus blood screening, said analyst Quintin Lai of Robert W. Baird, in a note to clients. Gen-Probe is also moving ahead with a human papillomavirus test that would compete with Hologic’s HPV test, which it acquired from Third Wave Technologies.
Hologic bought Third Wave for $580 million in 2008, and Cytyc for $6.2 billion in 2007. Hologic’s market value as of today is about $5 billion.
“Given Hologic’s history of value-destructive M&A (e.g. Cytyc, Third Wave Technologies), and that both companies are in the midst of major product launches where street expectations have come up, this deal raises significant questions about the ability of each company to independently accelerate organic growth,” said Tycho Peterson, an analyst with JP Morgan, in a note to clients this morning.
