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Beckman Reorganizes, Adds to Fold in Brea

Hurley: recently retired as chief executive after guiding company through first year under new owner

A reorganization of Beckman Coulter Inc. has kept the medical device maker’s largest operating division in Brea, where it’s expected to add a newly acquired company to its fold.

The move comes as part of a reorganization by Danaher Corp. The Washington, D.C.-based conglomerate bought Beckman for $6.8 billion in 2011 and spent much of the past year trimming and reshaping operations.

Danaher last week announced that it will pay $338 million for Iris International Inc. in Chatsworth, which is expected to become part of Beckman’s $3 billion medical diagnostics division based here when the deal closes in the fourth quarter.

Beckman makes instruments and reagents that are used to run various types of diagnostic tests and has about $3.8 billion in total annual revenue. It has 11,000 workers overall, with 1,350 in Orange County.

Iris has $130 million in annual revenue, and specializes in automated urinalysis testing done in hospitals and clinical laboratories. It also processes samples and has established a “personalized medicine division” with products and research for diagnosing the progress of certain cancers.

The company has some 400 workers and locations in Chatsworth; Carlsbad; and Westwood, Mass., along with international offices in Germany, France and the United Kingdom.

The move to buy Iris and integrate it into Beckman’s operations follows an announcement in March that Beckman’s $800 million life-science business would be based in Indianapolis, where it already had a presence.

Hurley Retires

Another key change: the retirement of Beckman Chief Executive Robert Hurley, who left his position after guiding the company through its first year under Danaher’s ownership.

Thomas Joyce, a Danaher executive vice president, is now president of Beckman Coulter Diagnostics. Scott Atkin, who has been with Beckman since 1996, has moved to Indianapolis as the division president of Beckman Coulter Life Sciences.

Danaher is a conglomerate that perhaps is best known as the maker of Craftsman tools sold at Sears, Roebuck and Co. stores. It bought Beckman, a 50-plus-year stalwart of OC’s medical device industry, amid quality-control problems with one of its diagnostic tests.

Beckman has cut or transferred an undisclosed number of jobs from Brea since it was acquired.

The company has not said whether any of the Iris work force will relocated to Beckman’s complex on Kraemer Boulevard in Brea.

An internal memo filed with the Securities and Exchange Commission said that there will “be some reductions associated with the acquisition, primarily at Iris. Certain functions that must be performed in a public company will no longer be required.”

The filing also said that Iris Chief Executive Cesar Garcia will continue in a leadership role. He will report to Joyce “through the initial phases of the acquisition.”

The acquisition of Iris “provides additional products for Beckman Coulter Diagnostics customers to help manage work flow in the central laboratory, with products that reduce manual review of slides and provide significant labor savings in the lab,” the filing said.

• Headquarters: Washington, D.C.

• Business: Conglomerate with varied holdings

• Founded: 1984

• Ticker symbol: DHR (NYSE)

• 2011 revenue: $16.1 billion

• Recent earnings: $600.1 million for June quarter

• Market value: about $38.6 billion

• Notable: In deal to acquire Iris International Inc., fold operations into Beckman Coulter’s medical diagnostic division in Brea

The filing also said that Iris has “excellent products that our target customers really like … Expect more information about this exciting opportunity once the transaction closes.”

Danaher has “taken the Beckman Coulter business and really formed two separate Danaher operating companies,” Joyce said at a June meeting with executives and analysts in Toronto.

It’s a “bolt-on acquisition” that adds an additional testing parameter as well as a leveraging opportunity for Beckman’s “strong presence” in emerging markets, said Richard Eastman, an analyst with Milwaukee investment bank Robert W. Baird & Co.

“It also signifies, in our view, that the [Beckman] integration continues to track forward such that management is comfortable adding another adjacency to the platform,” Eastman said in a client note issued after the deal announcement.

Danaher executives have had to do some heavy lifting with Beckman. Danaher acquired the company amid several product recalls that were ordered by the Food and Drug Administration and eventually prompted the sale.

Danaher Chief Executive H. Lawrence Culp said on a recent earnings call that the company’s second-quarter revenue jumped 25% to $4.6 billion, helped in part by its buy of Beckman.

“Exceptionally Pleased”

Culp said the company has been “exceptionally pleased” as it has applied its “Danaher Business Systems” management strategy to Beckman.

Danaher Business Systems “continues making an impact on many facets of the business, including quality, while setting the stage for future growth and improving the cost structure,” Culp said.

Beckman Coulter has seen continued improvement month over month, quarter over quarter, and in customer retention and win rates—and now low single-digit revenue growth in the past two quarters, Joyce told analysts in Toronto.

“Diagnostics, particularly with the addition of Beckman Coulter, has become a very significant portion of the [Danaher] portfolio,” Joyce said.

Life sciences and diagnostics has been one of the fastest-growing units within Danaher.

In-vitro diagnostic testing “represents just 2% to 3% of overall healthcare spending yet informs anywhere from 60% to 70% of ultimate treatment decisions. So it plays a critical role ultimately in patient outcomes,” Joyce said.

Beckman is also awaiting word from the FDA on the possible return of the troponin test for detecting heart attacks on its DxI and Access medical testing platforms.

Sybron

Danaher also owns Sybron Dental Specialties Inc. in Orange. It’s one of several industrial conglomerates that have jumped into the medical device and diagnostic field through buyouts.

Roper Industries Inc. of Sarasota, Fla., bought Sunquest Information Systems Inc., a Tucson, Ariz.-based software company that specializes in diagnostics, for $1.4 billion. And Corning, N.Y.-based Corning Inc. acquired the Discovery Labware unit of Franklin Lakes, N.J.-based Becton Dickinson & Co. for $730 million earlier this year.

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