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Beckman Coulter, a listed, California-based medical diagnostics firm, probably will raise its bid for Biosite to at least USD 88 per share before this Wednesday, according to two analysts and an industry source. Beckman officials did not respond to requests to comment.
Last week, Biosite informed Beckman it found a USD 90 per share bid from Inverness Medical Innovations superior to Beckman’s 25 March bid of USD 85 per share. Beckman has the right to match the Inverness bid by 2 May.
Stifel & Co analyst Greg Simpson said he would be surprised if Beckman walked away from Biosite without offering a counter bid. Though Beckman was criticized widely for overbidding at USD 85 per share, the analyst said Biosite would bring revenue growth to Beckman as well as an entrée into the point-of-care diagnostics market.
“Beckman has good reasons for buying Biosite and Inverness has a different set of reasons,” said Simpson, who expects Beckman may respond with a USD 90 per share to USD 92 per share bid next Wednesday. “Theoretically, Beckman is bigger [USD 3.9bn market cap] and could be the favorite if bids went higher. But the more it increases its offer, the less Beckman can be the ‘friendly bidder’ who will not exercise the cost-cutting Inverness has said it will do.”
Simpson estimated at least USD 30m could be slashed from the combined USD 110m spent on R&D by Inverness and Biosite in 2006. Jefferies & Co analyst Mark Richter said another USD 10m in savings could be realized from combined distribution and manufacturing operations. Moreover, Biosite’s market-leading B-type Natriuretic Peptide (BNP) test, would provide Inverness with a base into the cardiovascular testing market in which it plans to expand, said Simpson.
“Inverness has big ambitions and R&D efforts in the cardiovascular area, but not much revenue yet,” said Simpson. While Biosite brings a growth platform to Beckman, an industry source familiar with Beckman said its Biosite bid also was defensive. Diagnostic Products was the target Beckman had considered for some time, said the industry source, but Siemens bought Diagnostic Products for USD 1.9bn last year. Following GE’s USD 8.2bn bid in January to purchase the diagnostic business of Abbott Laboratories, Beckman was widely regarded as the next major diagnostics target.
Last year, Siemens purchased Bayer Diagnostics as well as Diagnostic Products. Simpson agreed, saying the consolidating diagnostics market will consist of survivors and non-survivors. Beckman now has to pay a higher premium for Biosite than it would have had it purchased Diagnostic Products, said the industry source. Beckman will increase its premium, added the industry source, because it does not want to become a target itself. Like Inverness, Beckman Coulter also wants Biosite’s major cardiovascular diagnostic product, the B-type Natriuretic Peptide (BNP) test, in which Biosite currently owns a 40% market share. Jefferies analyst Richter said he does not expect Inverness would not raise its bid to more than USD 95 per share because at that point, the synergies Inverness desires begin to diminish. Simpson said he expects Inverness could go higher than USD 95 per share and still make the deal accretive. Both analysts agreed Inverness could close the transaction quickly. While Beckman may now own a USD 1 per share to USD 2 per share advantage because its USD 85 per share bid has received regulatory approval, the discount could slip away quickly, said the analysts.
Inverness, based in Waltham, Massachusetts, has a market cap of USD 1.9bn. Biosite, based near Beckman Coulter in the Fullerton, California, has a market cap of USD 1.5bn.
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