The balance of power in the ultrasound industry shifted dramatically today with the announcement that Siemens Medical Engineering has agreed to purchase ultrasound vendor Acuson for about $700 million.
Siemens and Mountain View, CA-based Acuson believe the combination will create the largest ultrasound company in the world. Whether that will happen has yet to be determined, but the deal would certainly add considerable heft to Siemens’ ultrasound market presence.
"This merger will create a premier ultrasound business," according to Dr. Erich Reinhardt, president and CEO of Siemens Medical Engineering in Erlangen, Germany. "Together, our products will cover the entire market for IT networking and ultrasound equipment, from portable devices up to the ultra-premium platform."
Siemens and Acuson executives highlighted the benefits of uniting the geographical strengths of both companies.
"About 65% of the worldwide ultrasound market is outside the U.S.," according to Samuel Maslak, Acuson's chairman and CEO. "If you look at the distribution of Acuson’s revenues, 70% are from inside the U.S. On the other hand, for Siemens Medical overall, as well as for Siemens Ultrasound, 60% of their revenues are outside the U.S."
The deal might also make for some interesting product integration decisions, with flagship products such as Siemens’ Elegra and Acuson’s Sequoia traditionally being viewed as competitive products. But Siemens and Acuson executives indicated that they would support each vendor’s ultrasound products going forward.
"The intent is absolutely to continue both product lines, and integrate and combine the best of both worlds," according to John Pavlidis, president of Siemens Ultrasound of Issaquah, WA. "Both product lines are highly complementary."
Acuson’s ultrasound PACS product line, KinetDx, will also be continued, and integrated into Siemens’ PACS and IT offerings, according to the companies.
"In our analysis, KinetDx is extremely strong in a dedicated ultrasound PACS scheme, and we only see excellent potential synergies moving forward and integrating that into our more complete modality solutions," Pavlidis said.
Maslak also reported strong interest from both radiology and cardiology customers in KinetDx. One of the product's key strengths its open connectivity capability, he said.
"That openness will be pursued and even enhanced in this new business," he said.
The end of an independent era
Despite its recent financial underperformance, Acuson remains one of the industry’s leaders, and reported $476 million in revenues in 1999. In contrast, GE Medical Systems was reported to have 1999 ultrasound revenues of $585 million, a figure that led the Waukesha, WI-based company to claim ultrasound market leadership over Agilent Technologies, which was judged the 1998 market leader by industry analyst Harvey Klein of Klein Biomedical Consultants of New York City.
"In looking at combined 1999 ultrasound sales and service figures, the new company (Siemens and Acuson) would take over the number one spot, assuming the deal goes through," Klein said.
If completed, the deal will also mark the end of the last of ultrasound’s independent giants. In the early years of ultrasound, single-modality vendors such as Acuson, ATL Ultrasound, and Diasonics Vingmed Ultrasound were among the market leaders. But in 1998, consolidation changed the industry's dynamics, with GE acquiring Diasonics Vingmed Ultrasound and Philips purchasing ATL Ultrasound in blockbuster deals.
The trend toward multimodality imaging equipment procurement has left single-modality manufacturers such as Acuson feeling the pressure. In Acuson’s case, the company has been the subject of repeated buyout rumors. Lower-than-expected revenue growth and depressed stock prices in recent years only added fuel to the fire.
Under terms of the merger agreement, Siemens will first make a cash tender offer for all of Acuson’s outstanding common stock at a price of $23 per share, a 46.6% premium compared with Acuson’s September 26 closing price of $15.69 per share.
Siemens’ obligation to consummate the tender offer is subject to conditions customary to a transaction of this size and nature, including the tender of a minimum number of shares of Acuson common stock and the receipt of U.S. and German regulatory approvals, according to the firms.
The tender offer is expected to close in late October or early November. Once this phase is completed, and subject to other conditions of the merger agreement, Siemens will acquire the remaining shares of Acuson’s outstanding common stock at $23 per share through a merger of a wholly owned subsidiary of Siemens with Acuson. The companies expect the merger to close in the fourth quarter.
By Erik L. Ridley
AuntMinnie.com staff writer
September 27, 2000
Acuson earnings fall below expectations, August 8, 2000
Siemens moves forward with integration of SMS, plans ASP archiving service, August 7, 2000
Siemens upgrades Elegra 5.0 with DICOM features, May 2, 2000
Acuson says Q1 results won’t meet expectations, April 18, 2000
Strong fourth quarter leads GE to claim top spot in ultrasound, April 5, 2000
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