Fullerton’s Beckman Coulter Inc. has folded in a six-week bidding war for coveted acquisition Biosite Inc. of San Diego.
Wall Street dosen’t seem to mind.
The maker of medical testing instruments and supplies saw its shares rise 3% last week on word it wouldn’t make a higher bid for Biosite.
Beckman, which had a recent market value of $4 billion, saw its shares fall 7% when its first offer for Biosite was announced at the end of March.
Most analysts had liked the deal but now seem relieved Beckman’s given up the chase.
“We view as positive the decision to stand firm and not chase the deal,” said Quintin Lai, an analyst with R.W. Baird & Co., a Milwaukee-based investment bank. “While Biosite would have provided a new avenue for potential growth, we view Biosite as an opportunistic deal that got too pricey and not necessary for core growth.”
Beckman stepped away last week after Biosite sided with a $1.6 billion offer from Inverness Medical Innovations Inc. of Waltham, Mass.
Beckman first offered $1.55 billion for Biosite,itself a 53% premium,and later upped its bid to $1.64 billion.
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Beckman in Fullerton: original Biosite bid marked 53% premium |
(Inverness’ winning bid values Biosite at $1.68 billion, though the company’s paying $80 million less than that since it already owns 5% of the company.)
Nod to Shareholders
Paying more for Biosite, a maker of tests to detect heart disease and other conditions, wasn’t in the best interests of shareholders, Beckman said in a release.
The company’s higher offer was a “full and fair price,” Chief Executive Scott Garrett said.
Neither Garrett nor Paul Glyer, Beckman’s senior vice president of strategy, business development and investor relations,a key figure in the Biosite bid,was available last week.
Jeffrey Frelick, an analyst with Lazard Capital Markets, predicted earlier that Beckman wouldn’t pursue Biosite at any cost.
“I think you also have some folks who think they could stretch this to $90 to $93 if they want to get aggressive. But I don’t think they will go beyond that,” he said.
Inverness’ prevailing offer for Biosite is $92.50 a share.
Some may take Beckman to task for getting into a bidding war at all, wrote Banc of America Securities analyst Jon Wood.
“While we believed (Beckman’s) bid for (Biosite) was strategically and culturally sound, our concerns resulted from increased financial risk associated with the acquisitions and likely near-term dilution to (return on investment capital),” Wood said.
Without Biosite, Wood said he expects Beckman’s balance sheet to remain “appropriately leveraged in the absence of debt issued to complete the deal.”
If a Biosite buy would have been big for Beckman, then it stands to be huge for Inverness.
The company’s new offer for Biosite represents 86% of Inverness’ $1.86 billion market value last week.
Beckman would have paid 40% of its market value for Biosite.
Long Running Chase
The company’s decision to walk away ends months of feverish activity that was made public in March, when Beckman made its first premium-rich offer for Biosite.
The original bid was an attempt to end a behind-the-scenes bidding war, something Garrett acknowledged in a conference call after being pressed by analysts.
The chase continued in the public eye when Inverness came in with a higher offer for Biosite, representing 62% more than what the company was worth prior to Beckman’s offer.
Inverness is best known for home pregnancy tests such as Clearblue Easy and StressTabs and Posture-D vitamins.
Beckman first resisted engaging in a public bidding war.
Garrett appealed to Biosite’s shareholders with the prospect of a quick close and called the Inverness offer “unsolicited” and “highly speculative.”
Beckman sought Biosite’s tests for heart disease and other conditions for growth. That made the deal different than Beckman’s last big acquisition a decade ago, in which predecessor Beckman Instruments Inc. bought Miami’s Coulter Corp. for $1.1 billion to create today’s Beckman Coulter.
“It’s completely different,” Glyer said in an earlier interview. “It’s about gaining access to valuable tests.”
Biosite and Beckman have worked together since 2003 in the area of B-type natriuretic peptide testing for heart failure.
Growing on Its Own
Beckman doesn’t need Biosite to grow, according to analyst Lai.
The company’s main business selling machines and supplies to laboratories running tests for doctors “continues to be sound and growing,” he said.
Beckman is starting to see gains after restructuring in the past two years. In 2005, the company changed the way it accounts for leases of its medical testing instruments. The company now recognizes revenue spread out over the life of an equipment contract, rather than booking revenue as a lump sum at the start of the lease.
The new leases also lock customers into buying chemicals and others profitable supplies from Beckman.
In the first quarter, Beckman saw sales rise 8% from a year earlier to $613.6 million. Profits were up 14% to $37.1 million.
