Crystal-clear acquisitions

Corning Life Sciences to further broaden offerings with acquisition of majority of BD Discovery Labware

Jeffrey Bouley
CORNING, N.Y.—Although a quick look through your kitchencabinets will probably yield all sorts of evidence of Corning Inc.'s prominencein your life, many forget that the company's business spans many industries,especially high-tech ones—among them life sciences. That aspect of the businessgot the prospect of a big boost April 10 with the announcement that Corning hasreached a definitive agreement with BD (Becton, Dickinson and Co.) to acquirethe majority of its Discovery Labware unit for approximately $730 million incash.
 
The acquisition is expected to be complete later this year,subject to customary closing conditions, including receipt of regulatoryapprovals.
 
"The Discovery Labware unit's extensive product portfolioand established dealer network will significantly improve Corning LifeSciences' offerings to customers and is a critical part of Corning's long-termgrowth strategy," said Wendell P. Weeks, chairman, CEO and president ofCorning, in the news release about the deal. "With sales of approximately $235million, the acquisition will expand Corning Life Sciences' annual revenues by40 percent and catapult the segment toward its goal of being a $1 billionbusiness by 2014. And, the acquisition provides added momentum for Corning toachieve our $10 billion revenue target in the next few years."
 
While the company is far from floundering, life sciencesrepresents an important growth segment to offset lagging activity in otherareas, such as a drop in demand for flat-screen televisions. In 2011, forexample, profits at Corning's display technologies unit fell more than 20percent to $2.3 billion, which drove down overall profits, even though revenuehad increased to a record $7.9 billion.
 
Corning has been in life sciences for a long time—reachingback into the company history for the past 90 years or more, notes Dr. RichardM. Eglen, vice president and life-sciences general manager for Corning LifeSciences. As such, that market segment has long been a part of the company's visionand part of its growth strategy, but it's only in the last several years thatit has represented a very concerted and deliberate growth path, in whichacquisitions have played a key role, he says.
 
"We've had this trend toward growing the business throughinternal, organic growth and also selective mergers and acquisitions forseveral years now, and since about 2009, we've made three other acquisitions togrow the life-sciences business," Eglen tells ddn. "First, there wasAxygen in 2009, then Plaslab in 2010 and most recently, before DiscoveryLabware, was the acquisition of Mediatech at the end of 2011. We are highlyselective about the organizations we wanted to add to Corning, and BD'sbusiness fit very well into our selective needs and strategy. Acquisitions area large part of what's going on in life sciences in general, but while we maybe part of that trend, we are doing it in a more strategic and targeted waythan compared to many companies."
 
Axygen was attractive as a leading manufacturer and distributorof high-quality life sciences plastic consumable labware, liquid handlingproducts and benchtop laboratory equipment with operations in the UnitedStates, France, Poland and China.
Plaslab brought with it a wide array of sampling, testingand analysis products—including Petri dishes, bottles, containers, tubes, bagsand accessories—to complement the general labware, cell culture, lab equipmentand high-throughput screening and assay products offered by Corning.
Mediatech was attractive for developing, manufacturing andselling a broad range of high-quality cell culture media and molecular biologyreagents related to tissue and cell culture applications.
 
While he couldn't get into details about discussions thatled up to the BD acquisition plans or how long negotiations have been going on,Eglen tells ddn that "We were already aware that Discovery Labware was aleading supplier of plastic consumable labware; we always thought they would bea good addition to our business. In the past, we'd had some informaldiscussions about a possible acquisition, though nothing serious. But theyfinally decided they really liked the idea and they reached out to us andthat's when the real discussions started."
 
When this latest acquisition is complete, Corning will integratefour of the Discovery Labware unit's main product platforms: plastic consumablelabware (including tubes, pipettes, Petri dishes, tissue culture dishes andflasks); liquid-handling products; cell-based assays and cell cultureware; andADME research into the Corning Life Sciences business segment.
As for why Corning isn't buying the whole of BD's DiscoveryLabware business, Eglen says, "There were certain assets that were more alignedwith BD and they elected to retain those as part of their own growth strategy.So, the deal excludes their advanced bioprocessing platforms, for example."
 
James B. Flaws, vice chairman and chief financial officerfor Corning, noted in the news release about the deal that the company will usea portion of its domestic cash balances to fund the transaction.
 
"We plan to continue our current share repurchase activityand maintain our ability to provide additional shareholder distributions in thefuture, should the board of directors choose to do so," he said, adding that Corningpredicts the transaction will be slightly accretive in 2013. "We expect this togrow to 5 cents per share, excluding purchased intangibles amortization, whenfull integration into our existing business is complete by 2016. Life sciencesis an attractive growth industry and has low capital intensity. We expect thisacquisition to provide a stable stream of incremental cash flow to Corning aswe become a more balanced company."
 
"Although short-term investors will likely focus on the netnegative impact to free cash flow for 2012, we believe longer-term investorswill consider the impact to free cash flow in 2013 and beyond," maintainsAndrew Huang, an analyst with Sterne Ageet, adding, "We do not think theacquisition will impact Corning's ability to move ahead withshareholder-friendly distributions."
 
BD's Discovery Labware unit, headquartered in Billerica,Mass., has operations in Massachusetts, North Carolina and the United Kingdom,and extensive dealer networks in Asia, Europe and North America. Eglen notesthat it is still too early in the acquisition process to comment on what mightbe done, if anything, regarding the business' location, staffing or otherpossible changes, but he did note in an official statement that "we areextremely excited and proud to add these talented people, proven researchability and established and well-respected products to Corning Life Sciences."
 
"This acquisition fits really well into our short- andlong-term strategies for Corning Life Sciences, as well as Corning Inc. as awhole," Eglen tells ddn. "Corning's strategy is to use its strongfinancial position to grow in a well-integrated fashion and this fits in withthat. It improves our balance sheet and our overall strategic balance, andbrings to us a portfolio of products that allow us to offer a wide range of labproducts and services."
 
"We are pleased that we found in Corning a buyer committedto growing sales for these components of our Discovery Labware unit, ensuringtheir ongoing success, and continuing to deliver value and service tocustomers," said William A. Kozy, executive vice president of BD, in anofficial statement. "This sale will enable our BD Biosciences segment to focusresources and management attention on both our recent Biosciences acquisitions andour recently launched new instrumentation products, which are essential to ouraccelerated growth efforts."
 

 
Corning expands life-sciences product portfolio to includecell culture media, custom solutions
 
CORNING, N.Y.—Even as it looks to expand through theacquisition of most of BD's Discovery Labware business, Corning is alsoexpanding its life-sciences segment through continued organic growth, the mostrecent example being its newly increased portfolio of cell culture offerings,thanks to the addition of Corning cellgro, a line of high-quality cell culturemedia and molecular biology reagents for tissue and cell culture applications.
 
The Corning cellgro product line—announced in earlyApril—combined with Corning's disposable vessels and surfaces, reportedlyprovides researchers with a comprehensive portfolio of products for all stagesof cell culture growth and scale-up, from sample preparation and separationthrough harvesting. Corning cellgro products are manufactured by MediatechInc., a subsidiary of Corning Inc., which happens to be the most recentacquisition by Corning Life Sciences prior to the signing of the deal with BD.
 
"Enhancing our cell culture and molecular biology portfoliowith the cellgro brand supports our continued commitment to deliver customersworldwide with a full range of innovative laboratory products," said Dr.Richard Eglen, vice president and general manager of Corning Life Sciences. "Wenow offer researchers and manufacturers off-the-shelf or fully customizedbeginning-to-end cell culture workflow solutions to facilitate upstream anddownstream cell culture, help improve efficiency and produce more reliable,repeatable results."
 
"This advancement bolsters our acquisition strategy and thesynergistic approach we take to add incremental value to our customers," Eglenadded. "Since the acquisition of Mediatech Inc. in December 2011, we have alsosuccessfully integrated our sales and technical support teams to support thenewly expanded full product line."

Jeffrey Bouley

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