Agilent to pay $246 million for Stratagene

SANTA CLARA, Calif.—In early April Agilent Technologies announced that it signed a definitive agreement whereby it would acquire life science and diagnostic products company Stratagene Inc. for a cash payment of $10.94 per share or approximately $246 million.

The acquisition will strengthen Agilent's position in the life sciences market where it has well-established positions in genomics, proteomics and metabolomics. With Stratagene, Agilent now gains entrance to the fast growing diagnostic market. Stratagene, which reported sales of $96.5 million, should add about two percent to Agilent's total sales which currently top $5 billion annually across a range of different industries.

"We see Stratagene's technology, products and expertise as being highly complementary to Agilent's life sciences portfolio, enabling us to offer our customers more complete workflow solutions," says Nick Roelofs, vice president and general manager of Agilent's Life Sciences Solutions Unit in a press release announcing the deal. "Stratagene has a strong R&D team as well as excellent presence in the important academic and government markets."

The play for a company such as Stratagene is typical of Agilent's acquisition strategy says Ed White an investment analyst covering the electronics industry with Lehman Brothers. "They tend to look for smaller companies and smaller acquisitions where there is a strong technology base and one that they can leverage using their sales force," White notes. "Typically they focus on the technology and not on acquisitions where they will fix a broken company."

That said, it has been a bit of a trying year for Stratagene. In January it paid $10.75 million in an out-of-court settlement in an ongoing patent case with molecular diagnostics company Third Wave Technologies. But moving beyond the litigation, which has occupied the company since late 2004 when Third Wave first filed suit, was an important milestone for Stratagene, noted CEO Joseph Sorge, in the company's 2006 earnings announcement.

"A goal for 2007 is to continue to reduce expenses associated with litigation, and as a result achieve improved cash flows. With a stronger balance sheet and freedom to market our FullVelocity technology platform, we believe we are well positioned to successfully cultivate relationships with emerging leaders in the molecular diagnostics market," Sorge says.

Apparently, the molecular diagnostics route is one that is still of great interest to Sorge. In conjunction with the closing of the acquisition by Agilent it was announced that Sorge would purchase undisclosed Stratagene assets from Agilent for $6.6 million and would additionally license from Agilent certain of the molecular diagnostics technologies of Stratagene. With the assets and licenses in hand, Sorge will press forward with a new molecular diagnostics company.

"I'm looking forward to having more time to focus on research and discovery and making a difference in human healthcare," Sorge says in a prepared statement announcing the deal. "Our discussions with Agilent have been very friendly and cooperative and we expect a smooth transition. I believe that we have established a relationship that will allow each of us to pursue common interests going forward."