GE to acquire Elscint’s share in ELGEMS

GE Medical Systems and Elscint have reached an agreement in which GE will acquire Elscint’s 50% share of ELGEMS, a joint venture formed in 1997 by the two companies to manufacture nuclear imaging systems, for $30 million.

As a result of the transaction, ELGEMS will become a wholly owned GE business. ELGEMS, based in Haifa, Israel, is responsible for the research, development, engineering, and manufacture of all GE Medical gamma cameras and other nuclear imaging products.

GE Medical and ELGEMS pioneered the development of the Hawkeye fusion imaging system, which combines the anatomic delineation of CT with the functional imaging capabilities of nuclear medicine.

Once the transaction is completed, which is expected to occur by the end of October, GE Medical will have more than 350 employees in Israel.

Concurrently, ELGEMS entered into a sourcing agreement that will have Elscint continuing to act as the primary source for the various components used in ELGEMS nuclear imaging products.

Elscint began to investigate the possibility of a joint-venture partner partly out of frustration with the company’s slow progress in nuclear medicine (SCAN 6/25/97), according to Nathan Hermony, who had headed Elscint’s nuclear medicine division and who became ELGEMS’ president and CEO. Despite its well-regarded gamma camera technology, the company’s market share was stuck at 10% for years, Hermony said.

Coupled with a slowdown in equipment purchasing, the time was ripe for some kind of radical change in business strategy, Hermony said. Elscint’s board also viewed the deal as a benefit for Israel, by establishing ties between a homegrown company and one of the world’s largest multinational corporations.

Meanwhile, GE was seeing its market share shrink due to competition from variable-angle dual-head cameras, which GE did not start selling until 1997 with its Millennium MG product. GE saw the joint-venture deal as a way to combine resources with Elscint and access new products that would enhance its position in the nuclear medicine market.

ELGEMS developed technologies for both firms, but GE and Elscint were still competing for sales in the broader market, with similar product lines.