TRENDS & PERSPECTIVES
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The Triage Meter by Biosite Inc. (San Diego).
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Inverness Medical Innovations Inc. (Waltham, MA) and Beckman Coulter Inc. (Fullerton, CA) were vying for the heart of Biosite Inc. (San Diego) in a love triangle that heated up during the last few months. It is a bit ironic, too, as Inverness and Beckman both wanted Biosite’s expertise in cardiology testing technologies that help clinicians determine quickly whether a patient has congestive heart failure or is having a more emergent cardiac event.
Biosite, a biomedical company that has also made discoveries in the proteomics arena aimed at advancing medical diagnostics, had been talking to prospective buyers for about a year. According to Biosite, over 70% of U.S. hospitals currently use the company’s Triage rapid diagnostic tests. Its total revenues in 2006 were $308.6 million. Valued at $55.38 per share the day before the first offer, Biosite’s stock is now worth more than $90 per share.
Beckman Coulter, a large instrumentation company specializing in biomedical testing, enjoyed $2.5 billion in sales in 2006. On March 25, 2007, the company announced it would enter into a definitive merger agreement to acquire Biosite’s out-standing common stock for a cash tender of $85 per share, or $1.55 billion.
Scott Garret, president and chief executive officer of Beckman Coulter, called the merger “an exciting transaction that grew out of our successful relationship with Biosite over the past four years.”
However, on April 5, Inverness, a maker of home pregnancy and fertility tests and rapid point-of-care diagnostics, confirmed it made an unsolicited cash tender bid for Biosite for $90 per share, beating Beckman Coulter’s offer by $5 per share. Inverness, a company only slightly larger than Biosite and about half the size of Beckman, had less than 5% of previously acquired Biosite common stock and planned to delve into cardiology with this acquisition.
Ron Zwanziger, chairman, president, and chief executive officer of Inverness, said the acquisition “would make for a powerful long-term strategic fit by enabling Inverness to leverage Biosite’s strength in proprietary protein markers and robust cardiovascular platform.”
But Zwanziger’s earlier comments made Inverness sound like a jealous lover, citing “serious concerns regarding the integrity of a supposedly competitive bidding process that would lead Biosite’s management to enter into a preemptive merger agreement with another party rather than fully explore a combination with us.” Nonetheless, Zwanziger remained “hopeful that Biosite’s board would respond favorably.”
Garret called the offer from Inverness “unsolicited, highly speculative, and conditional” in light of Inverness’s statement that it would require additional due diligence to confirm financing. However, when Inverness submitted signed commitment letters from its proposed financing sources, Biosite’s board officially stated that the offer was a “superior proposal” as defined in the initial agreement with Beckman Coulter. Zwanziger was “extremely pleased.”
On May 2, Beckman Coulter countered with its own offer of $90 per share. Inverness quickly responded with a new binding offer of $92.50 per share about a week later. Zwanziger said that Inverness expected an announcement by Biosite that it was a “superior proposal” by May 9, or it might exercise its right to withdraw. Despite the threat and Biosite’s refusal to deem the offer superior at that time, Inverness stayed in the running with its offer set to expire May 16.
Jeff Ellis, head of diagnostics M&A at CrossTree Capital Partners (Tampa, FL), said he thought Inverness would get the deal and could price it up even higher than $92.50 per share if necessary. “The only question is whether Beckman will respond now and if Inverness has to up its price again or whether they’ll let it go,” Ellis said. “I won’t be surprised if they just let it go.”
On May 14, Biosite announced that it deemed Inverness’ latest offer of $92.50 per share a “superior proposal” to the revised merger agreement with Beckman Coulter. On May 15, Beckman announced that it would not go above its offer of $90 per share, claiming that doing so would not serve its stockholders. Garret said that while it still felt “the combination of Biosite with Beckman Coulter is strategically sound,” it also believed that $90 per share was “a full and fair price for Biosite.”
Garret added that, “Although we do not agree with this conclusion, we expect that Biosite will terminate its existing merger agreement with Beckman Coulter and, concurrently, pay Beckman Coulter a termination fee of $54 million.” Biosite said in a separate statement that Inverness had agreed to pay its $54 million termination fee.
