INDUSTRY NEWS
Three U.S. companies have been vying for control of Vision Systems Ltd. (VSL; Melbourne, Australia), a contract manufacturer for IVD instruments in the cancer detection market on an OEM basis. Despite a flurry of activity during the past couple of months, many issues still remain unresolved.
The commotion began in August when VSL and Ventana Medical Systems Inc. (Phoenix) entered into a merger implementation agreement. Ventana was prepared to pay approximately $346 million for VSL, hoping to combine the instrument technologies of both companies, expand reagent development and manufacturing capabilities, and expand sales and support infrastructure to accelerate growth and product development.
In September, Cytyc Corp. (Marlborough, MA) jumped into the fray, announcing that it would initiate a tender offer to acquire VSL for approximately $374 million. Cytyc was eager to add VSL’s Novocastra-branded antibodies to its portfolio, and incorporate VSL’s product development unit in order to strengthen its position in the global diagnostics market.
“Vision presents an ideal opportunity to leverage our sales, service, and laboratory support infrastructure,” said Patrick J. Sullivan, Cytyc’s chairman, president, and chief executive officer, in the company’s announcement.
Despite expectations of a bidding war, Ventana announced in mid-September that it would not raise its bid for the company, and would instead file a patent suit against VSL. In its complaint, Ventana alleged that Vision’s Bond X and maX OCR instruments infringe its patent for scheduling algorithms, which enable optimal sequencing of multiple tests. The suit did not affect Cytyc’s plans, which reaffirmed its intention to buy VSL.
The issue was stirred up further on September 26 when rumors began to circulate that Danaher Corp. (Washington, DC) was also interested in acquiring VSL. The Wall Street Journal reported that Danaher might pay as much as $400 million for VSL. Danaher officials acknowledged that the company had engaged in preliminary discussions with and had been conducting limited due diligence on VSL regarding a competing bid. Proving it was not out of the game yet, Ventana announced two days later that it had acquired 12% of VSL’s outstanding shares.
Not to be outdone, on September 29, Cytyc increased its offer to $517 million, offering shareholders a 53% premium over the Ventana agreement price. “We decided to increase our offer to underscore our commitment to completing this transaction as soon as possible,” said Sullivan. He also announced that the offer had already secured prebid acceptances from shareholders for approximately 29.6 million shares of VSL.
Danaher and Ventana countered with an announcement on October 1 that they were engaged in discussions “regarding a potential cooperative effort to acquire VSL.” However, the companies also noted that “there can be no assurance that Danaher and Ventana will reach an agreement with respect to a cooperative effort to acquire VSL, or that Danaher will make an offer of any nature for VSL.”
On the same day, VSL sent Ventana a notice that unless it issued a more favorable counteroffer by October 3, it would terminate the merger agreement. Since no counteroffer was made, VSL terminated its agreement with Ventana. Meanwhile, Ventana announced that it was still continuing to explore its options regarding VSL, including possible cooperation with Danaher.
Meanwhile, Cytyc filed an application with the Australian Takeovers Panel to set aside Ventana’s acquisition of VSL shares. Cytyc also wrote to the Australian Competition & Consumer Commission with concerns about the negative competition consequences it says an acquisition of VSL by Ventana would have.
“The combination of Vision Systems and Ventana would be a combination of the number-one and number-two players in the market,” said Sullivan. “It will result in a combined market share of around 85%, blocking healthy competition.” Sullivan also urged the VSL board to endorse the Cytyc offer, but that has not yet happened.
