Europeans probe effects of merger between GE and Instrumentarium

GE extends offer to acquire shares and options

The price GE is willing to pay Instrumentarium took a dive from just over Euro 40 to about Euro 36 in the wake of a shareholder vote to award a special dividend. The stock price dove even further, however, to around $34 on the Nasdaq exchange, as regulatory worries increased regarding the proposed deal.

GE warned shareholders and investors that voting to issue the special dividend of Euro 0.70 would cause the company to cut its bid price (SCAN 4/2/03). Such a cut was expected, as negotiators wrote a contingency for it into the acquisition agreement signed by GE and Instrumentarium management in December. But the most significant changes may still be ahead.

On April 3, the European Union Commission launched a detailed probe into the proposed acquisition to examine the effects such a merger might have on competition in mammography and patient monitoring, as well as mobile x-ray C-arms. The commission and the antitrust division of the U.S. Department of Justice are cooperating closely on the investigation, according to the commission. Both regulatory bodies must approve the deal for it to go through.

The EU probe is expected to last four months. In response, GE extended its offer to acquire all shares and options of Instrumentarium until Aug. 29, 2003, at 10 a.m. EST. The offer had been set to expire April 11, 2003.

The opening of an in-depth investigation does not prejudge the final outcome, the commission stated in a public announcement. But it does strengthen doubts about whether the deal will pass regulatory scrutiny, if not in the U.S., at least in Europe. GE management has publicly held that the deal would not be anticompetitive and that none of Instrumentarium's assets would have to be sold for the deal to go through.

The commission conducted an initial one-month investigation after being notified of GE's intended acquisition of Instrumentarium. This investigation found that the proposed merger, if completed, would lead to "high market share" in the markets for patient monitors, C-arms, and mammography equipment, both at the level of the European Economic areas (the 15 EU member states plus Norway, Iceland, and Liechtenstein) and at the level of some other national markets.

The greatest concern is outside medical imaging. Specifically, the commission's in-depth review will seek to examine whether the combination of Instrumentarium and GE might make it more difficult for rivals' patient monitors to interoperate with Instrumentarium's anesthesia machines.