Shares in Fullerton-based Beckman Coulter Inc. have surged on speculation about a possible acquisition bid for the medical diagnostic equipment maker by Abbott Laboratories Inc.
Analysts who follow the companies said they don’t know of any pending deal but don’t rule one out. A report last week in BusinessWeek has Abbott possibly offering $100 a share to acquire Beckman. “I’m not surprised that Abbott Laboratories is being talked about,” said John Garrity, associate research director with Investec Ernst & Co. in New York. “It makes sense. It would be a perfect fit.” Spokeswomen for Beckman and Abbott declined comment, citing company policies against discussing rumors. A $100-per-share offer would be a 20% premium for Beckman, whose shares were trading at about 80 last week. A deal under those terms would value Beckman at $2.9 billion, or about 22% above Beckman’s $2.4 billion market capitalization. An acquisition of Beckman could help Abbott bolster its diagnostics business, according to Garrity. Last November, 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. Abbott is estimated to lose approximately $250 million in sales this year because of the issue and took a pretax charge of $168 million in the final quarter of 1999 to cover the fine and related expenses. In 1999, Abbott’s diagnostics division accounted for $3 billion in annual revenue, or 23% of sales. Abbott also produces drugs and hospital supplies. “They were shut out for a year,” Garrity said. “What Beckman Coulter did is go in and target Abbott’s former customers.” Abbott is seeing Beckman “eat its lunch” on some diagnostic testing systems, he said. Beckman’s status as the only company with FDA approval to sell or lease a combined, automated prostate cancer testing system could be another attraction for Abbott, Garrity said. “That’s another area where they have a little bit of an edge,” he said.
Conflicting Opinions
Not everyone thinks a possible deal makes sense. An analyst who follows Abbott for a Midwestern brokerage and asked not to be named said a potential acquisition of Beckman does not seem like a good fit from a strategic sense. Abbott is interested in acquisitions, he said, but pharmaceutical companies are more likely targets. A deal could be good for Beckman and its shareholders, according to David Anast, publisher of the Biomedical Market Newsletter in Costa Mesa. Anast said Beckman has made strides to “pare off deadwood” and improve its marketing and sales. On a personal level, Anast said he would prefer to see Beckman remain independent because of its long-term history and employees in Orange County. Beckman’s Orange County presence dates back to 1955, when Arnold Beckman moved the company he founded in 1934 to Fullerton from Los Angeles County. Beckman, a scientist who invented the first pH meter, celebrated his 100th birthday in April. Beckman is among Orange County’s largest medical industry employers, with approximately 2,200 workers locally and 10,000 in all. Its product lines range from centrifuges for universities to DNA and protein systems for drug and biotech companies to laboratory blood tests.
Beckman is no stranger to acquisitions. In 1982, SmithKline Corp., now SmithKline Beecham, acquired Beckman Instruments Inc. in an effort to become a broader-based healthcare company. SmithKline divested Beckman in 1988 to focus on drug development. Beckman struck a $1 billion deal to merge with Coulter Corp. in late 1997. Coulter, then based in Miami, was known for its blood analysis products.Most observers said the merger has gone smoothly. “They have effectively integrated the Coulter acquisition,” said Susan Vissers Lisa, a Merrill Lynch & Co. analyst. Beckman Chief Executive John Wareham said the Coulter acquisition worked because of a lack of product overlap. In July, Wareham told the Business Journal that Beckman Instruments needed to merge with Coulter in order to hold its own in the medical diagnostic industry market, which he values at $19 billion in annual sales.
Vissers Lisa said she has not heard any Beckman takeover talk. Beckman’s stock has done well this year because it is improving its core businesses and signing alliances for its new technology, she said. Between March and May, the company’s shares surged from around 50 to about 65. They took off again in August and have climbed in the past few weeks to their current level of about 80. Amin Khalifa, Beckman’s chief financial officer, declined to talk about the Abbott rumor but told BusinessWeek he believes fundamentals and new products have been driving up the stock. n
