GE pumps $10 million into Fischerto preserve access to Tilt-C product

Denver firm uses cash to retire bank debt

Fischer Imaging received a cash infusion of $10 million from GEMedical Systems last month as part of the Milwaukee vendor's effortto maintain access to the Tilt-C interventional C-arm, which itoutsources from Fischer. The deal gives GE a 19% ownership stakein Denver-based Fischer.

In an agreement announced June 21, GE purchased 1.33 millionshares of Fischer convertible preferred stock at $7.50 a share.GE did not receive any board representation and agreed to a 25%limit on its ownership of Fischer. Fischer's stock price roseover 15% to $6.63 a share on news of the investment.

The primary motivation for the investment was GE's desire tomaintain a stable production source for Tilt-C, which featuresa 90°/90° tilting table capable of both fluoroscopicand nonvascular interventional procedures. GE and Fischer signedan OEM agreement for Tilt-C and other x-ray products in January1994 and the companies redesigned the system to GE's specifications(SCAN 2/2/94). GE began production shipments of Tilt-C severalmonths ago.

The GE investment is welcome news for Fischer, which has experienceddeclining revenues for the past year. Fischer underwent a restructuringin November and posted a $469,000 net loss in its most recentfinancial quarter. The company has been rumored to be a takeovertarget, and it adopted a poison pill defense late last year inan effort to stave off a hostile acquisition (SCAN 11/23/94).

GE apparently had Fischer's position in mind when it negotiatedits $10 million investment. GE can take over manufacturing ofTilt-C in exchange for its preferred stock in the event of a takeoverof Fischer by "certain named competitors," whom thecompanies declined to name publicly.

GE has confidence in the future of the Tilt-C product line andwanted to preserve its relationship with Fischer, according toJohn Falconi, general manager of GE's global x-ray business.

"We made this investment to make sure we have a supplierthat has the capability to grow with us as we grow the volumeon the product," Falconi said.

Fischer chairman and CEO Morgan Nields said his firm has beenaffected by a slowdown in equipment purchasing that caused theoverall x-ray market to drop 25% in 1994 and Fischer's sales tofall 7% in the same period. The GE investment was not a rescuepackage, however, he said. Fischer will use much of the cash toretire bank debt, after which it will have a $15 million lineof credit with its lender. The rest of GE's cash will be usedfor working capital purposes.

The depressed market makes it difficult for imaging companieslike Fischer to raise funds through public stock offerings, accordingto Nields.

"It would be virtually impossible for us to go out and raisecapital in the public market in these kinds of conditions,"Nields said. "(GE's investment) is a good way to strengthenour balance sheet when other channels are not available for capital,even though we didn't necessarily need the capital to grow thebusiness."

Nields sees GE and Fischer collaborating on future projects,particularly in the interventional imaging realm, which Fischerhas chosen to emphasize. For example, Fischer is developing aprototype breast biopsy device for use with MRI scanners. Fischerhas been designing the product with a GE Signa user but has notyet formally discussed the commercial potential of the devicewith GE.

"That's a prime example of the type of thing that we mayget into for discussion," Nields said.

In other Fischer news, the company announced last week that CFORonald Scott has left for personal reasons. He is being replacedby James Newcomb, who most recently was CFO for Neodata Servicesin Boulder, CO.