"Lab M&A Update"

Beckman Coulter and Genoptix Offer Themselves Up for Sale

During December, news reports identified each firm as conducting active discussions with interested buyers

FOR DIFFERENT REASONS, last month two large companies in the lab industry put themselves up for sale. Assuming that both companies are sold, one consequence may be further consolidation in both the in vitro diagnostics (IVD) manufacturing sector and the lab testing sector.

It was on December 9, 2010, when news broke that Beckman Coulter Inc., of Brea, California, one of the largest IVD manufacturers in the world, had engaged Goldman Sachs Group Inc., to help it evaluate a potential sale. Financial analysts said that the firm, with a market capitalization of around $4 billion, might fetch a sales price as high as $5 billion.

Then, just four days later, on December 14, news sources reported that the specialty lab testing company Genoptix Inc., of Carlsbad, California, had retained the services of Barclays Bank Plc to advise it and manage the sales process.

Different Reasons to Sell

Each company is pursuing a sale for different reasons. At Beckman Coulter, 2010 was a challenging year. It recalled its troponin test during the first half of the year. That test generated sales of about $60 million per year. Then, in September, its CEO, Scott Garrett, resigned unexpectedly.

In the past seven months, Beckman’s stock price has traded as low as $43.95 and as high as $78.27. For the full year 2010, Beckman Coulter will report revenue of about $3.6 billion.

For Genoptix, its stock price was trading as high as $39.00 through last spring, then fell to as low as $13.51 in September. That has put its management team under pressure to improve the company’s performance and raise its share price.

The market value for Genoptix is estimated at about $369 million. For fiscal 2010, Genoptix is expected to have revenue of about $198 million.

Buyers Are Interested

A number of companies are reported to be interested in acquiring Beckman Coulter. As strategic buyers, the names of Danaher Corporation and Thermo Fisher Scientific Inc., have been mentioned. Latest news coverage says that, in a second round of bidding for Beckman, there are two leading bidders. One is made up of Blackstone Group LP and Kohlberg Kravis Roberts & Co. The second bidder is Apollo Global Management LLC and Carlyle Group.

In the case of Genoptix, no specific bidders have been identified in press reports. Analysts speculate that the usual suspects are probably looking at Genoptix’s financials. That would include Quest Diagnostics Incorporated, Laboratory Corporation of America, and Sonic Healthcare, Ltd.

Were strategic buyers to acquire Beckman and Genoptix, then further con- solidation will take place in the IVD and lab testing sectors. Were sales to be made to pri- vate equity firms, then each company would continue to operate independently.

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