GE bid for Instrumentarium faces revision, regulatory questions

Special dividend may trigger adjustment

Efforts by GE to purchase Instrumentarium appear to have run into a couple of snags-one regulatory, the other financial. The two companies have received requests for additional information from the U.S. Department of Justice as part of its regulatory review of the proposed acquisition. No details were publicly available, although GE reiterated its expectation that the transaction would close in the second or third quarter of 2003. In the meantime, both firms are working with regulatory agencies in the U.S. and Europe to clear the way for the transaction.

To accommodate newly raised questions by the Justice Department, GE planned to extend the tender offer period beyond its original preliminary expiration date of April 11 and will publicize details of any such extension prior to April 11.

GE management has publicly stated its belief that the acquisition is not anticompetitive and that none of Instrumentarium's assets would have to be sold for the deal to go through. The Justice Department's questions, however, have rekindled these issues.

The original cash deal was for Euro 2 billion ($2.14 billion). But GE's cash outlay may turn out to be substantially less because of a special dividend proposed by Instrumentarium's board of directors.

Instrumentarium shareholders discussed at their annual meeting March 25 whether to issue a combined regular and special dividend. The total combined dividend proposed by the Instrumentarium board is Euro 4.70. Of this, Euro 0.70 would be the regular annual dividend.

Prior to the vote, GE announced that approval of the dividend would result in a downward revision of its cash offer to Euro 36 per share (from just over Euro 40 per share). GE stated that this revision is in accordance with the terms and conditions of the agreement entered into by GE and Instrumentarium. If implemented, the revision would cut the cost of the acquisition to about Euro 1.8 billion ($1.93 billion).

In response to the announcement, Instrumentarium stock dropped from above $40 per share to about $35, reflecting the possible change in valuation of the deal. As SCAN went to press on March 26, neither company had announced the outcome of the vote or whether the revised tender offer would be implemented. Instrumentarium share price ended the day at $35.01.