JOHN WAREHAM
Chairman and chief executive,
Beckman Coulter Inc.
Most acquisitions never live up to the fanfare of when they’re announced. Expectations of “synergy” and “enhanced shareholder value” often give way to culture clashes, financial charges and a slumping share price for the suitor.
Count Beckman Coulter Inc. among the exceptions. After spending much of 1999 building the foundation of Fullerton-based Beckman Coulter, Chief Executive John Wareham saw investors reward him and the medical diagnostics company in 2000 for what has been a smooth combination of Beckman Instruments Inc. and Coulter Corp.
“It has worked,” Wareham said. “This is a real combined company.”
On Wall Street, Beckman shares doubled last year. In early September, they hit a 52-week high of 41, adjusted for a 2-for-1 stock split completed last month. As of late December, Beckman counted a market capitalization of $2.4 billion.
“Wareham has done a phenomenal job,” said John Garrity, an analyst with Investec Ernst & Co. in New York. “He had a rather difficult challenge. What he needed to do was to re-establish credibility (after the merger) with Wall Street.”
Beckman acquired Miami-based Coulter in late 1997 for $1.15 billion. Beckman needed Coulter to hold its own in the medical diagnostics industry, said Wareham, who values the company’s market at $19 billion annually. The keys to the deal, according to Wareham, have been a lack of product overlap between Beckman and Coulter and common cultures.
The acquisition, while broadening Beckman’s product line and boosting revenue, also brought a debt burden that Wareham has moved steadily to decrease. As of Sept. 30, Beckman’s debt-to-capital ratio was 75.4%, down from 81.9% at the end of 1999.
The merger continued to take hold in 2000 with new products and customers. Beckman Coulter received Food and Drug Administration clearance for several new tests, including one that detects ecstasy and other amphetamines and another that checks for excessive testosterone levels.
Deals, Challenges
In November, Beckman signed a deal worth $35 million annually with Premier Inc., a San Diego-based alliance of hospitals and health systems. Under the pact, Beckman plans to supply hematology instrument systems and supplies to Premier’s 1,800 facilities and health systems. Beckman also signed a $30 million deal with Quest Diagnostics Inc., one of the country’s largest clinical laboratories and operator of Nichols Institute Diagnostics in San Juan Capistrano, for hematology instruments and supplies.
Beckman also took over sales and distribution responsibilities for its Access immunoassay system for 90 countries in Europe, Africa and the Middle East. Beckman said it could get more sales by selling Access in concert with its chemistry and progressive automation approach.
Wareham faces new challenges in 2001. Beckman has said continuing economic weakness in certain parts of Europe and Japan could impact its clinical diagnostics and life science research units. Nearly half of Beckman’s sales come from global markets.
Analyst Garrity said Wareham has handled currency issues in Europe effectively though foreign futures contracts and other hedging tools.
Even after the Coulter acquisition, Beckman is under pressure from continued industry consolidation and competition. There is “increased pressure on diagnostic equipment makers to broaden their product offerings to encompass a wider range of test capabilities, greater automation and higher volume capacity at a lower cost,” the company said in a recent federal filing.
In the fall, Beckman itself was the subject of consolidation talk. BusinessWeek reported that Beckman could be an attractive takeover target for Abbott Laboratories Inc., a larger competitor that is looking to bolster its diagnostic testing business. The rumor, unconfirmed by either company, helped send Beckman’s stock to its highest point in 2000.
Interestingly, Wareham was able to capitalize on troubles at Abbott to gain new business for Beckman in 2000, according to Garrity. In late 1999, the Abbott Park, Ill.-based company signed a pact with the Food and Drug Administration to stop making and distributing certain in-vitro diagnostic tests until it corrected production problems. Abbott also agreed to pay $100 million to settle the issue.
Wareham “was adept at taking advantage of a situation that fell into his lap,” Garrity said. “He really saw an opportunity to get into hospitals that were dominated by Abbott.”
Rapid Growth
For most of 2000, Beckman grew its sales and boosted profitability at an even faster pace. For the nine months ended Sept. 30, the company’s sales increased 5% to $1.3 billion from the year-ago period, while net income surged 23% to $83 million.
Beckman Coulter is Orange County’s largest medical device employer, with around 2,230 local employees at its facilities in Fullerton and Brea. Product lines include centrifuges, DNA and protein systems and blood tests. Arnold Beckman, the 100-year-old scientist who invented the first pH meter, founded the company in 1935 as National Technical Laboratories.
Wareham has streamlined Beckman Coulter by reducing its overall work force in the past few years. The company employs 9,630 people in all, down about 1% from a year ago. In OC, Beckman’s head count has increased 2% from a year ago.
“We like Orange County from a biomedical point of view. The talent pool is just wonderful,” Wareham said. Beckman moved from Pasadena to Fullerton in 1954.
Wareham, a pharmacist by training, joined Beckman in 1984 as vice president of its diagnostics systems group and was promoted to president and chief operating officer in 1993. He became chief executive in September 1998 and assumed Beckman’s chairmanship in February 1999, after the retirement of longtime leader Louis Rosso. In November, Wareham was named a director of Mentor, Ohio-based Steris Corp. n
