GEC windfall prompts speculation over potential imaging acquisitions

March 1, 1999

GEC windfall prompts speculation over potential imaging acquisitionsPhilips, Siemens, Applicare and Acuson cited as possible targetsComments by the chairman of the U.K. parent company of imaging modality and PACS firm Picker International

GEC windfall prompts speculation over potential imaging acquisitions

Philips, Siemens, Applicare and Acuson cited as possible targets

Comments by the chairman of the U.K. parent company of imaging modality and PACS firm Picker International may be a sign that consolidation at the highest levels of the medical imaging industry may not be over. In an interview with The Observer on Jan. 24, General Electric Company chairman George Simpson speculated that the company could buy the medical electronics divisions of either Philips Electronics NV or Siemens AG. London-based GEC is mulling what to do with a $4.5 billion cash infusion it will receive following the sale of its Marconi Electronics Systems defense business to British Aerospace.

The newspaper also said that while Picker is now at the core of GEC's operations following its exit from the defense industry, analysts believe that, if it doesn't grow fast enough, such as through a Philips or Siemens acquisition, Picker could be sold off. After the divestiture of Marconi, Picker will make up 25% of the new GEC, according to Picker spokesperson Rob Spademan. GEC has stated its commitment to using the Marconi proceeds to bolster its communication and technology concerns, such as Picker.

If rumors of a Picker and Philips combination prove true, this won't be the first time such a deal has been discussed. The two firms were close to merging in 1987, but the proposal fell apart due to the financial impact of falling exchange rates for the U.S. dollar. The valuations of both firms were affected, making the merger less attractive. Philips representatives denied the prospect of a revival of that kind of deal, however.

Siemens representatives also dismissed the takeover rumors. There has been no contact between GEC and Siemens, and Simpson's comments are not to be taken seriously, according to Melanie Schmude, a spokesperson for the Erlangen company.

"We have never received an offer from them, and we would not consider it," she said.

Siemens is sensitive to divestiture speculation, having had to fend off rumors for the past two years that its parent might be exploring a sale. The division's improving profit picture and repeated statements by Siemens chairman Heinrich Pierer that Medical Engineering was a core Siemens business appear to have calmed things down.

A day after Simpson's comments appeared, GEC seemed to back away from his statements. GEC characterized reports of a Philips or Siemens takeover as speculation, according to AFX newswire. GEC executives were reportedly holding "intense internal discussions" regarding the company's strategic options, AFX said.

Should a major acquisition not materialize, GEC would probably plow its Marconi windfall into a stock buyback, Simpson said. GEC is also considering potential deals in the telecommunications industry, he told The Observer. Such an acquisition could include technology involving the transmission of medical images, Picker's Spademan said.

Acquisition rumors continued to swirl following an article in the Jan. 31 edition of another U.K. paper, The Sunday Times, which identified several medical imaging companies that the GEC was said to be examining as acquisition candidates. In the article, The Sunday Times said that GEC was exploring an acquisition of Dutch PACS firm Applicare Medical Imaging, which provides Picker with its RadWorks workstation software. This rumor appeared to have no basis in fact, however. Picker has not made any such acquisition bid, said Applicare CEO Ruud Kroon.

Another alleged target with possible PACS implications is ultrasound vendor Acuson, which the article alleges was thought to have received an $800 million offer from GEC. If a Picker-Philips combination does not come about, Picker might be interested in matching the Dutch vendor's acquisition of ATL in 1998 by buying Acuson. There is no truth to this rumor, and Acuson is not up for sale, according to an Acuson spokesperson.