Esaote plans to purchase Pie Medical from Philips

Pie operates in low-end ultrasound markets

Pie Medical, the Dutch ultrasound company that specializes in ob/gyn and veterinary markets, may soon change ownership. For the past two years, the Maastricht, Netherlands company has been offering low-end products to customers of Philips Medical Systems International. But that may soon end.

Italian imaging vendor Esaote announced on Jan. 22 that it has signed a letter of intent with Philips to acquire Pie for approximately $21.8 million. Pie's large installed base, some 17,000 systems, could open the door to sales of higher end products made by Esaote, while the low-end products made by Pie would fill out Esaote's product line.

"We are the leading manufacturer of ultrasound in Europe, so I think through Pie Medical we can consolidate this position," said Pietro Amoretti, director of investor relations at Esaote. "We can integrate our range of products and complete our line in human and veterinary fields, because (Pie) really has good products in these markets for gynecologists and internists."

The specifics about how this consolidation might take place, however, remain to be worked out. Whether staff or their positions would be combined or moved, for example, from Maastricht to Esaote's headquarters in Genoa has not yet been decided.

"We are doing the due diligence, so I think we have to wait until we see the complete synergy and the way to go on," Amoretti said.

The impact on Philips' offerings in ultrasound should be minimal. The agreement will keep in place existing supply arrangements between Pie and its dealers and distributors, including Philips. Executives at Philips Medical Systems International were unavailable for comment regarding the planned purchase.

The acquisition of Pie would take place in the midst of a transitionary period for Esaote. Figures released by the Italian company indicate that 1997 revenues of $157.5 million were up just 1% over the previous year. Potentially distressing for executives is the failure of the company to grow its international sales, which the company in the past has stressed as a priority. In 1996, sales outside Italy accounted for 56% of revenues, but in 1997 the percentage dropped to 53%. Strongholds in Germany and Russia, which constitute major markets for Esaote, were underperformers, beset by persistent stagnation in demand, according to Esaote executives. The one bright spot on the international scene was sales by subsidiary Esaote China, which pulled in about $9.6 million.

The company's bottom line was shored up mostly by a 6.2% increase in domestic sales. Specifically, Italian sales accounted for $73.7 million, up from $69.1 million the previous year. The addition of Pie could help bolster the corporate bottom line, at least a little. Pie generates about $23 million in revenues annually.