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Ge to buy british medical firm Original Source Link: (May no longer be active)
http://www.forbes.com/markets/newswire/2003/10/10/rtr1105869.htmlhttp://www.forbes.com/markets/newswire/2003/10/10/rtr1105869.html
WRAPUP 3-GE to buy Amersham for $9.5 bln, reins in guidance
Reuters, 10.10.03, 11:29 AM ET
(Recasts lead, adds details, comment from GE chairman, changes byline)
By Tim Mclaughlin and Janet McBride
NEW YORK/LONDON, Oct 10 (Reuters) - General Electric Co. (nyse: GE - news - people) agreed on Friday to buy British medical firm Amersham Plc for $9.5 billion as the U.S. conglomerate moves further into high-growth fields amid weaker performance at its traditional industrial businesses.
GE, which had already said it would be unable to meet it most optimistic forecast for double-digit earnings growth this year, again cut its 2003 profit outlook, blaming slow economic growth and higher raw material costs in its plastics business.
GE shares fell 2.3 percent, or 71 cents, to $29.41 in morning trade in New York. Shares in Amersham, which announced on Wednesday it was in takeover talks with a mystery suitor, surged 15 percent at 756 pence in London.
Under the agreement, GE will pay 800 pence per share in the all-stock deal for Amersham, the latest in a series of health sector takeovers as firms seek critical mass in a fragmented industry.
GE Chief Executive Jeffrey Immelt has orchestrated a string of deals to drive the company into fast-growing industries as other parts of its empire come under pressure.
Over the past several years, GE has made about 30 acquisitions to boost its medical imaging business, which Immelt sees as one of its most promising units. Immelt ran GE Medical before becoming chairman and CEO in 2001.
"I'm not a deal junkie," Immelt told analysts and investors on a conference call. "That's not the essence of GE. We're business operators."
Economic weakness has affected demand for GE power turbines, its jet engine arm has been hit by an air travel slump while higher costs have crimped earnings in plastics.
GE on Friday cut its full-year earnings forecast to $1.55 to $1.57 a share. The previous estimate was $1.55 to $1.61 per share. It was the second time this year that GE cut its full-year outlook, down from an original range of $1.55 to $1.70 a share..
On Wednesday, GE signed a deal for its NBC television unit to take over Vivendi Universal's entertainment arm.
The Amersham acquisition brings together two complementary businesses. GE makes medical scanners that use Amersham's diagnostic agents, which are injected into patients to detect disease.
Immelt said buying Amersham, the first UK enterprise to be privatised by Margaret Thatcher's government in the 1980s, would help GE expand its fast-growing high-technology medical business.
Pauline McPherson, global fund manager at Standard Life Investments, said Amersham fit well into GE's growth strategy, though she added that it was paying a full price and wanted reassurance the deal would not effect its credit ratings.
"I personally would like to see GE slowing down the steady stream (of deals) and not risk over-stretching its balance sheet," she said. Standard Life's global portfolio has an "overweight" position on GE stock.
GE executives defended the premium they plan to pay for Amersham, citing its projected growth. Also, GE expects another $5 billion in equity capital in 2004 from retained earnings on its financial services arm.
QUARTERLY PROFIT SLIPS
GE said on Friday its third-quarter profit before an accounting change fell to $4 billion, or 40 cents per share, from $4.1 billion, or 41 cents a share, a year earlier, in line with analyst forecasts.
For the fourth quarter, the company said it expected to post earnings within a range of 45 cents to 47 cents per share, down from its prior forecast of 46 cents to 49 cents a share. GE said the new forecast represents a rise of up about 45 percent from last year.
Revenue for the Fairfield, Connecticut-based company, which also has interests in broadcasting and financial services, rose 2 percent to $33.4 billion.
GE said it did not only covet the imaging part of Amersham and would hold on to its life sciences business, which supplies technology to make drugs from antibodies and proteins. Amersham also makes equipment to research and manufacture drugs.
"We have absolutely no plans to spin off any of the businesses. These businesses fit well together and work well together," Immelt said in a conference call.
Adding Amersham's skill base would position GE well for the coming era of personalized medicine, in which treatment will be customized to the medical profile of each patient, Immelt said.
"DEEP POCKETS"
GE plans to pay 0.4367 new GE shares for each Amersham share. It will adjust the ratio if necessary to guarantee the 800p value. Analysts said the bid was unlikely to be bettered.
"You would have to be very competitive and have deep pockets to bid against GE," said Navid Malik, analyst at Williams de Broe.
Other companies previously tipped as bidders included Johnson & Johnson (nyse: JNJ - news - people) and Roche Holding AG .
GE said the deal would not hurt 2004 earnings and forecast annual revenue synergies of $350 million to $400 million after three years, adding it would boost earnings per share by 1 percent by 2005.
GE already has a research partnership with Amersham dating back to November 2001 to develop imaging tools for detecting early signs of cancer and Parkinson's disease.
In December, it agreed to buy Finnish medical equipment group Instrumentarium for 1.75 billion euros ($2.07 billion), part of a spate of sector consolidation that recently saw Zimmer Holdings Inc acquire Swiss orthopedics firm Centerpulse for around $3 billion.
Immelt said GE was in constructive talks with antitrust regulators. Amersham Chief Executive Bill Castell said there was a "high probability" of the deal clearing regulatory hurdles.
"There's no product overlap but there is a shared vision," said Castell, who will join GE's board and become CEO of the group's GE Healthcare Technologies business.
Amersham was advised by JP Morgan and Morgan Stanley. GE was advised by Goldman Sachs.
For a table of GE's revenue and earnings by division, please click on [nN10389538] (Additional reporting by Camila Reed, Dan Lalor, Mark Potter and Mark Bendeich in London and Chelsea Emery in New York)
Copyright 2003, Reuters News Service
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