The all-cash transaction is expected to be fundedthrough available cash and additional financing of term loans and high-yieldsecurities, with an expected completion of the deal in the second half of 2012.
Cowen and Co analyst Doug Schenkel offers theopinion that the $3.7 billion price tag seems to be a full and fair valuationand he expects that a competitive bid is unlikely. The deal may create ripplesin other ways, though, as noted by Oppenheimer & Co analyst David Ferreiro inan investor note when he indicated the acquisition of Gen-Probe will probably attractinvestors' attention to the remaining independent companies with moleculardiagnostic platforms, including QIAGEN and Cepheid.
Hologic notes that Gen-Probe "is a leader inmolecular diagnostics products and services, making it a highly complementaryaddition to Hologic's growing diagnostics portfolio," and the combined companywould have pro-forma revenues overthe past 12 months of approximately $2.4 billion, adjusted earnings beforeinterest, taxes, depreciation, and amortization of $822 million (excluding costsynergies, which are predicted to be approximately $75 million in within threeyears following the close of the transaction) and offer a wide spectrum ofhealth products globally.
"Gen-Probe is an ideal partner and strategic fitto Hologic's existing diagnostics business and complements our focus on scalingand diversifying our diagnostics franchise," said Rob Cascella, president and CEOof Hologic. "Gen-Probe is a unique player in molecular diagnostics, withbest-in-class technology, including the differentiating automation capabilitiesof TIGRIS and PANTHER, a broad menu of tests, such as the recently approvedAPTIMA HPV and Trichomonas assays, and a leading blood screening business. Thistransaction establishes Hologic as a premier company in sexually transmitteddisease diagnostics and advances our core focus on women's health. With uniquecapabilities and an impressive new product pipeline, our combined company willbe well positioned globally to capitalize on the fast-growing moleculardiagnostics market with an established global infrastructure."
In addition, Gen-Probe's PROCLEIX line of HIV,HCV, HBV and West Nile Virus blood screening products, as well as its strongpartnership with Novartis were attractive to Hologic and provide "a globalreach and significant growth opportunities for the combined company."
The combined company also expects to createadditional value through significant cross-selling opportunities, a combinedglobal sales force and complementary research and development and operationalcapabilities.
"Through this compelling transaction, we willachieve critical mass in our core diagnostics business and meet the needs ofour customers with a broader portfolio of diagnostics technology, automationand connectivity solutions," Cascella said. "With the combination of ourcapabilities, Hologic will operate a diagnostics franchise with the growthpotential similar to our breast health franchise."
"Together, Gen-Probe and Hologic will be verywell-positioned to pursue a complete range of diagnostic opportunities inwomen's health, with a stronger focus on the dynamic molecular diagnosticsmarket," added Carl Hull, chairman and CEO of Gen-Probe. "Specifically, we areexcited about the opportunity to increase demand for our APTIMA women's healthproducts based on Hologic's global commercial presence."
Hologic expects the inclusion of Gen-Probe intothe company will be $0.20 accretive to Hologic's adjusted earnings per share inthe first fiscal year after close and "significantly more accretive"thereafter. Hologic also expects the transaction to accelerate top and bottomline growth rates and says the combined company expects to have strong freecash flows, which will be used primarily to reduce debt, "with the expectationto return to pre-transaction leverage levels within three years."
Following the close of the transaction, Gen-Probewill become a wholly-owned subsidiary of Hologic. Hologic will retain itsheadquarters in Bedford, Mass., and the combined company will maintain asignificant presence in San Diego. Cascella will continue as president and CEOof Hologic and Hull will oversee the company's combined diagnostics business.
