Biotech Values

[DewDiligence]

GE Acquires CLRT for $5/sh in Cash

[That’s a 34% premium to CLRT’s Thursday close. CLRT has hard a hard time collecting its bills for diagnostic services rendered to uninsured patients, but GE ought to be able to do a better job in this department.]

http://www.reuters.com/article/idCNN2226056920101022

›Fri Oct 22, 2010 9:46am EDT
By Nick Zieminski

NEW YORK, Oct 22 (Reuters) - General Electric Co (GE) extended this month's acquisition streak, agreeing to buy cancer diagnostics company Clarient Inc (CLRT) for about $580 million in a deal that sent Clarient shares up 33 percent in early trading.

GE's Healthcare unit will pay $5 per common Clarient share or $20 per preferred share, the companies said. Clarient's molecular diagnostics technology allows pathologists and oncologists to identify cancers, a market expected to triple to $47 billion within five years.

Clarient, based in Aliso Viejo, California, recorded 2009 sales of $92 million, according to Reuters data. In July, the company forecast 2010 sales of $108 million to $115 million and said it would be profitable for the year.

Even before the deal was announced, Clarient shares reached a 52-week high on Thursday.

Whereas in the past, doctors would rely on radiology to discover tumors, more are now relying on tests that identify the specific type of cancer, finding a cancer's exact "fingerprints" and making it possible to more precisely choose a matching therapy.

Molecular diagnostics is about a $400 million a year business for GE, said John Dineen, president and CEO of Healthcare.

"We're moving from the radiology space into molecular diagnostics," Dineen said. "It's really a play on cancer and cancer is a leading chronic disease all over the world."

Safeguard Scientifics Inc. (SFE), which owns 26 percent of Clarient shares, said separately it would get $145 million from the deal.

RETURN TO DEALMAKING

GE, the largest U.S. conglomerate, has said it could spend up to $30 billion on takeovers over the next few years, marking a return to the dealmaking track it had exited during the recession.

"Healthcare is a key infrastructure business in GE and we're going continue to look for opportunities to expand the portflio," GE's Dineen said.

…Goldman Sachs was the financial adviser to Clarient, while JP Morgan advised GE Healthcare. The deal is expected to close in late 2010 or early 2011. Stockholders holding about 47 percent of Clarient's outstanding Clarient stock have agreed to tender their shares.‹