Ex-Fischer Imaging execs scoop up assets

October 31, 2006

Executives at Byers Peak, a Denver medical contract manufacturer, thought they had a done deal when they signed an agreement in August for the remaining assets of now-bankrupt Fischer Imaging. But they didn’t count on the entry of two former executives of Fischer Imaging, Morgan Nields and Kinney Johnson, whose company outbid competitors last week to buy those assets in a public auction.

Executives at Byers Peak, a Denver medical contract manufacturer, thought they had a done deal when they signed an agreement in August for the remaining assets of now-bankrupt Fischer Imaging. But they didn't count on the entry of two former executives of Fischer Imaging, Morgan Nields and Kinney Johnson, whose company outbid competitors last week to buy those assets in a public auction.

The deal for those assets, which is expected to close today, covers the Fischer radiology, electrophysiology, and surgical (RE&S) business. Nields, reached by DI SCAN today in the midst of negotiations, confirmed that the deal was expected to close. He deferred further comment until a later date.

At stake are the rights and title to VersaRad, a ceiling-mounted U-arm designed for general-purpose radiography; SPX, a ceiling-mounted C-arm intended for interventional applications; EPX, a single-plane electrophysiology system; and the Bloom heart stimulator for electrophysiology.

Byers Peak executives thought they had a lock on all four properties. On Aug. 21, the company signed an agreement to purchase the assets (DI SCAN, 9/23/06, Fischer Imaging declares bankruptcy). But a subsequent bid by another company led the bankruptcy court to void the agreement, leading to the "overbid auction" Oct. 24, and ultimately bringing the assets to JN Properties, Fischer Imaging's former landlord whose general partners are Nields and Johnson.

JN Properties owns the building Fischer Imaging occupied, when the company was still a force in the imaging community. It leased the property to Fischer on July 31, 1992, as part of a 20-year agreement. Last year, JN Properties amended the lease to allow early termination, after Fischer's expected sale of certain company assets to Hologic. In consideration for this amendment, JN Properties was to receive $4 million plus certain accrued 2005 taxes immediately following closure of the Hologic transaction, according to the 8-K filed Sept. 27, 2005. The Hologic deal closed late last year.

The lease termination fee may have provided the financial ammunition JN Properties used to win its bid for the RE&S assets, according Phil Prescott, president of Byers Peak, whose company duked it out with JN Properties until the end of the bidding war.

The overbid process was held in a bankruptcy courtroom, but it reminded Prescott "of going to a cattle auction." Each company bid on the RE&S assets, bumping up the price in $20,000 increments, as required, until finally the price got beyond what Byers Peak was willing to pay.

"We played it as far as we could," Prescott said. "But that's the way the process works."

If the deal closes today, as expected, Nields and Johnson will be poised to resurrect part of the company they once led. The two men joined Fischer's board of directors in 1973 and in the 30 years since have held various leadership positions. Nields stepped down as CEO in 2000 but remained as board chairman until 2003. Since then he has founded Abla-Tx, a developer of software for monitoring thermal ablation therapy, at which he serves as president and CEO.

Johnson, a one-time president of Fischer Imaging, now serves as a director and managing partner of Abla-Tx. He is also a founding partner of Sequel Venture Partners of Boulder, CO.

Where the two men take RE&S will depend on what their firm, JN Properties, does with the assets, which the company agreed last week to pay a minimum $590,000 within 12 months of closing to acquire. Included in the deal are all rights, title, and interest to the VersaRad, EPX/SPX, and Bloom product lines. Some related equipment and inventory, excluding Bloom finished goods inventory, as well as general intangibles and intellectual property necessary to design, manufacture, market, sell, distribute, support, and repair the product lines went along with the deal. JN Properties agreed to pay Fischer up to another $80,000 depending on the number of Bloom units sold in the first year after the transaction closed.

The agreement initially struck between Byers Peak and Fischer Imaging was substantially lower, providing for a base of $260,000 and, like the JN Properties deal, up to another $80,000, depending on the number of Bloom units sold in the coming year.

Hologic last year purchased other assets associated with Fischer's mammography products. Siemens earlier this year purchased assets relating to stereotactic breast biopsy equipment, a deal that was required by a Federal Trade Commission ruling that Hologic could not possess all available mammography intellectual property. The RE&S assets were to have gone to Byers Peak - but by the end of today those assets are expected to be in the hands of JN Properties.