GEMS to acquire 20% stake in ALI in ultrasound miniPACS collaboration

Companies will cooperate on R&D and marketing

GE Medical Systems last month signed a letter of intent to acquire up to a 19.9% stake in ALI Technologies, a developer of ultrasound miniPACS workstations. The deal is the second major corporate change in as many months in the ultrasound miniPACS segment, following Kodak's agreement to purchase ATL's Nova MicroSonics division in February (SCAN 2/19/97).

Although details are still being hammered out, closer ties will be established between GE and ALI in both product development and marketing. For GE, the deal secures a closer relationship with a profitable and swiftly growing player in the ultrasound miniPACS market.

"Multimodality companies need to have image management solutions for each individual modality," said Howard Mars, Americas strategic marketing manager for ultrasound at Milwaukee-based GE. "What ALI brings to us is the ability to network across a department."

ALI's commitment to DICOM 3.0 conformance was also attractive to GE, Mars said. ALI, on the other hand, gains access to GE's global marketing and distribution channels. While ALI will now work in other modalities with GE, that factor wasn't the key reason for ALI to agree to the deal, said Greg Peet, ALI's CEO.

"Ultrasound miniPACS remains a perfectly viable business," he said.

Richmond, British Columbia-based ALI has an installed base of over 60 UltraPACS networks and reported that sales doubled last year, Peet said.

Under the terms of the agreement, ALI will issue preferred shares with an aggregate value of $8.2 million (Canadian) that GE will have rights to convert into common stock at a price of $6.80 per share. ALI may also issue additional preferred shares with a value of up to $5.4 million (Canadian). These additional shares will also have rights of conversion at a price of not less than $6.80 per share.

Overall, the preferred shares will be convertible into not more than two million common shares and would not represent more than 19.9% of the total common shares outstanding after financing. In addition, this equity issue is subject to regulatory approval.

Both parties will benefit from this arrangement, according to Michael Cannavo, president of Image Management Consultants in Winter Park, FL.

"It's an excellent deal for both companies," he said. "ALI will get the capital it needs to continue to grow and GE will get a solid performer in the ultrasound market that has the added bonus of expertise in other areas such as connectivity."

With a prominent competitor securing an equity position in the company, it will be interesting to see what effect, if any, the deal will have on ALI's existing marketing alliances with companies such as the ultrasound group of Siemens Medical Systems in Issaquah, WA, and Diasonics Ultrasound of Santa Clara, CA.

Executives at Siemens' ultrasound group said that GE's investment will have no effect on their relationship with ALI, which was cemented in 1995 when the companies signed a deal in which UltraPACS would be sold through Siemens channels, with networking connections developed to Siemens' Sienet PACS line (SCAN 8/2/95).

"There will be no changes in the relationship," said Lothar Koob, group vice president of the ultrasound division. "If (ALI) stays the way it is, it is not a problem."

For its part, ALI is hoping it will be business as usual. ALI CEO Peet said that his company intends to continue with its existing business model.

"ALI remains an independent company and we're going to pursue our own business plan," Peet said. "We want to continue to have relationships with everybody. It's going to be a level playing field."