GE wraps up purchase of Instrumentarium

October 29, 2003

Spacelabs monitors and Ziehm XR to be spun offLengthy regulatory negotiations surrounding GE's bid to buy Instrumentarium were successfully completed Oct. 9. To win the deal, however, GE got less than it wanted.After 10 months of

Spacelabs monitors and Ziehm XR to be spun off

Lengthy regulatory negotiations surrounding GE's bid to buy Instrumentarium were successfully completed Oct. 9. To win the deal, however, GE got less than it wanted.

After 10 months of negotiations, regulators on both sides of the Atlantic approved the Euro 2 billion deal, following a series of concessions on GE's part. First, European Commission officials assented to the merger on Sept. 2 with the proviso that GE sell off Instrumentarium's Spacelabs Medical business in patient monitors and forge supply agreements with its new operators (DI SCAN 09/10/03).

On Sept. 17, the U.S. Department of Justice and the Canadian Competition Bureau announced their approval, but they added the requirement that GE divest the Ziehm surgical C-arm business of Instrumentarium.

Efforts are now under way to make good on promises to sell these assets as soon as possible, preferably before the end of 2003, according to Olli Riikkala, former president and CEO of Instrumentarium.

"In both cases, there are negotiations going on, and there are several buyers already identified," he said.

Instrumentarium's mammography business escaped the regulatory process unscathed.

EC officials initially raised concerns that the merger would provide GE with an over-large share in the breast imaging equipment market. The Commission's final ruling, however, dismissed this possibility, pointing to the strength of remaining competitors and unspecified "specific features" of the mammography market. The DoJ and Canadian Competition Bureau raised no objections to GE's acquisition of the mammography business.

GE will continue to sell all commercially available mammography systems from both companies, according to Jennifer Christiansen, communications manager of GE Medical Systems' global x-ray business. The newly expanded portfolio will include Instrumentarium's Diamond, Performa, and Alpha mammography products, alongside GE's Senographe family of digital and conventional systems.

GE will continue to promote the Senographe 2000D as its premier digital flat-panel solution, Christiansen said. The Senographe 2000D, in common with all GE Medical Systems flat-panel products, converts x-rays to digital data via a cesium iodide scintillator and a nontiled amorphous silicon detector. Development of this amorphous silicon detector technology has already cost the company more than $150 million.

Prior to the merger, Instrumentarium executives had placed their faith in a competing x-ray detector technology based on amorphous selenium. Instrumentarium incorporated this technology in its Diamond FFDM system. The future of this technology now is in doubt.

"For more than a decade, GE has continuously evaluated digital flat-panel technologies," Christiansen said. "We have had the opportunity to purchase a selenium detector from other sources, and GE remains convinced that amorphous silicon is the very best technology to bring our healthcare customers to the forefront today and build for the future."

GE's center in Buc, France, will remain the global headquarters for the company's mammography business. Instrumentarium's imaging operations in Finland will join GE's existing network of technology centers in the U.S., France, China, and India. The Tuusala center in Helsinki will focus on developing new products and advanced applications in mammography and other x-ray modalities, including dental imaging.

"GE hasn't been in dental imaging for almost 20 years, so this acquisition will give us a new presence there, " said Dow Wilson, president and CEO of GE Medical Systems' IT business. "It's a place where we can leverage our brand."

Instrumentarium's Helsinki base will become the European headquarters of GE Medical Systems' IT unit. It will be overseen by Riikkala, who becomes executive vice-president of GE Medical Systems' $2.6 billion IT business.

"We have been growing the IT business at between 15% and 20% a year," Wilson said. "The business in Europe is worth Euro 650 million, and we expect to grow this to over Euro 1 billion over the next couple of years."

The newly merged organization will go live Jan. 1, 2004, Riikkala said. The company should be functioning as one coherent organization by the end of that year.

"We have spent a long time trying to understand each other, and in a sense, this long regulatory process has been helpful," he said. "We have more similarities than differences, and that is reassuring. Both companies are growth driven, and both companies have a global orientation toward customers, product developments, and service needs."