Amersham confirmed yesterday that the mystery suitor for the company was General Electric, the front runner amongst the companies put forward by the rumour-mongers yesterday.
The proposed deal values Amersham at 800 pence per share, or £5.7 billion (€8.1bn), a premium of 45 per cent over Amersham's share price of 552 pence on 7 October, the last trading day before the UK company announced that negotiations were underway. Amersham shares closed up 19 per cent yesterday at 660 pence, after a 16 per cent rise on Wednesday.
Should it go through, the acquisition will lead to the formation of GE Healthcare Technologies, a division combining Amersham and GE's medical businesses. These include Amersham's medical imaging, protein separation and drug discovery technology businesses, as well as GE's diagnostic imaging, healthcare services and information technology operations. It will be headquartered in the UK.
Sir William Castell, Amersham's chief executive will become a vice chairman at GE and a member of the US firm's board of directors, as well as CEO of GE Healthcare Technologies. Joseph Hogan, senior vice president of General Electric, will continue to lead GE Medical Systems.
Sir William said that the aim is to apply technology across the spectrum of medicine, from the prediction and location of disease, through to profiling, treatment and tracking of response, to bring forward the concept of personalised medicine. The combined R&D spend of GE Healthcare Technologies will be $1.1-$1.2 billion and will not be reduced in the wake of the merger.
Jeffrey Immelt, GE's chairman and CEO, noted that the combined business would have pro forma 2003 sales of $13.3 billion (€11.3bn), with $8 billion coming from the imaging business, $2.7 billion from pharma diagnostics and biosciences and $2.5 billion from healthcare IT. The latter includes Denmark's Instrumentarium business which became part of GE yesterday after nine months in regulatory review. He would not be drawn on how long the regulatory process for the Amersham deal would take, saying only that he expects it to complete in the first half of next year.
Immelt told analysts and reporters this morning that GE and Amersham have almost no product overlap and great potential for synergies. For example, the relationship with Amersham brings GE a direct route into the pharmaceutical sector, something it has been trying to achieve for more than two years. Meanwhile, Amersham will gain immediate benefits from GE's broad sales and marketing network, e.g. in China where GE Medical Systems expects to make sales of around $1 billion this year.
Observers said that the attraction of Amersham for GE lay mainly in the medical imaging business, which fits closest with the US firm's own medical activities and forms the bulk of Amersham's sales. There was speculation that Amersham's protein separations and drug discovery units may in time be spun out as they are a new business for GE. However, Immelt stressed that the company is firmly committed to biosciences and will retain the units and indeed add to them.
He pointed out that clinical IT was a completely new area for GE two years ago, and is now a core division with sales of more than $2 billion a year and 30 per cent growth.
The transaction will be completed on a share exchange basis, with Amersham stockholders receiving 0.4367 of a new GE share in return for each share held in the UK firm.
For the six-month period ended 30 June 2003, Amersham reported sales of £808 million and net income of £45 million, with net assets of £1.2 billion. In the same period, GE Medical reported revenues of $4.5 billion (€3.8bn) and operating profit of $746 million.
Also today, GE reported third-quarter earnings of $4 billion, or 40 cents per share, down from $4.1 billion or 41 cents a share a year earlier. The figures were affected by lower sales of gas turbines and pension commitments. Revenues were $33.4 billion, up 2 per cent. The company also cut its EPS guidance for the fourth quarter to 45 cents from 46-49 cents.
GE also said the Amersham deal not hurt its 2004 earnings and would provide revenue synergies of $350-$400 million after three years.