GE acquiring Lunar to extend reach in bone density, orthopedic imaging

By Erik L. Ridley, AuntMinnie staff writer

June 2, 2000 --

GE Medical Systems broadened its efforts in women's health and orthopedic imaging today, announcing a definitive agreement to buy bone densitometry and extremity MR vendor Lunar in a stock swap valued at approximately $150 million. The acquisition, which is subject to Lunar shareholder and government approvals and other customary conditions, is expected to close by the third quarter of 2000.

The agreement marks the latest move in a flurry of acquisition activity by GE. The Waukesha, WI-based vendor has aggressively entered new markets, added to its presence in other sectors, and purchased complementary technologies. In the last 18 months, GE has acquired Applicare Medical Systems, Marquette Medical Systems, OEC Medical Systems, and the MRI and nuclear medicine assets of Elscint.

If completed, the Lunar deal would bring a slew of new products into GE's portfolio, principally the Madison, WI-based vendor's family of axial and peripheral densitometry scanners. Lunar, of Madison, WI, offers dual-energy x-ray absorptiometry (DEXA) systems as well as its Achilles line of ultrasound densitometers. Although the U.S. bone densitometry market is thought to be nearing saturation, executives hope to take advantage of GE's extensive international distribution channels for future sales growth.

"By extending its reach into the women's health market, we (want to) take the Lunar platform and grow it globally to meet massive unmet needs in the world densitometry market," said Jeffrey Immelt, GE Medical Systems president and CEO. Immelt and Lunar chairman and CEO Dr. Richard Mazess discussed the deal in a conference call held today. Mazess and Immelt project double-digit sales growth in bone densitometer sales outside of the U.S. over the next five years.

GE took steps to enter the bone densitometry market at the 1999 RSNA meeting, signing an agreement with Danish firm Pronosco to market and distribute that firm's X-Posure unit. GE believes the proposed Lunar acquisition will not change its relationship with Pronosco, as its products are complementary with Lunar’s.

In addition to Lunar's bone densitometry operations, GE will gain access to extremity MR scanners to complement its whole-body imaging systems. Lunar offers the Artoscan-M system and E-Scan, an open unit. Both products are supplied to Lunar by Italian firm Esaote.

In other orthopedic scanner offerings, Lunar sells Orca, a mini-fluoroscopy C-arm. Although final product decisions will not be made until after the acquisition closes, operations associated with Orca -- a very small part of Lunar's business -- will likely be shifted to GE OEC Medical Systems in Salt Lake City, Mazess said.

GE also acquires a company that has remained profitable despite the maturation of the U.S. bone densitometer marketplace. For the 12 months ending March 31, Lunar reported revenues of $91 million and net income of $7 million. Eighty percent of Lunar's sales are derived from bone densitometer revenues, with the remainder from sales of extremity MR scanners, Mazess said.

In May, Lunar announced the sale of its 10,000th bone densitometer. Of those, approximately 7,200 were DEXA units and 2,800 were Achilles ultrasound scanners. Company executives also claimed that Lunar had outsold its nearest competitor by 16% over the past year and 20% in the previous quarter. The company also reported success with its Prodigy fan-beam densitometer, which generated more than 50% of the company's table-based system sales since its debut in early 1999.

In connection with the merger agreement, Lunar granted GE an option to acquire newly issued Lunar common stock, representing 19.9% of its total shares outstanding, at $17 per share. In addition, Dr. Mazess agreed to vote his shares of Lunar, representing approximately 30% of the outstanding stock, in favor of the proposed deal.

If the deal is completed, each Lunar shareholder will receive $17 per share payable in GE stock. The actual number of shares of GE stock each Lunar shareholder receives will be based on GE's stock price over a period prior to the transaction close. Lunar will likely be renamed GE Lunar, a name change similar to previous GE acquisitions.

By Erik L. Ridley
AuntMinnie.com staff writer
June 2, 2000

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