Recent telecom deals don’t dampen GEC’s ardor for medical imaging

New chief executive Donovan pursues more deals

The corporate parent of Picker International has been on the acquisition warpath of late. But so far all the major acquisition deals signed by General Electric Company of the U.K. have been for telecommunications firms, despite rumors linking GEC to several medical imaging companies. This trend has sparked some industry watchers to speculate whether GEC’s future growth plans include Cleveland-based Picker.

Building Picker’s position in medical imaging is an integral part of GEC’s corporate strategy, according to Michael Donovan, the GEC executive who was named acting chief executive at Picker following the departure in April of longtime CEO Cary Nolan (SCAN 4/14/99). GEC’s recent telecommunications deals will have no impact on Picker’s growth prospects in medical imaging, and GEC is still actively looking for medical imaging firms to buy, Donovan told SCAN.

“GEC started this process with substantial horsepower in terms of net cash. We’ve got substantial borrowing capacity,” Donovan said. “There are a number of areas in the overall medical systems market that we are very interested in, both in organic growth and acquisitive growth.”

Since launching a sweeping program in late December to remake the company, GEC has aggressively pursued telecommunications firms, with several high-profile acquisitions. The most recent deal has GEC buying Internet switching firm Fore Systems of Warrendale, PA, for $4.5 billion. GEC also has agreed to buy telecommunications firm Reltec of Cleveland for $2.1 billion.

Despite the size of these deals, GE still has an ample war chest to pursue other companies, Donovan said. In addition to its existing cash on hand, it has access to lines of credit worth over $6.4 billion. And once GEC sells its Marconi Electronics Systems defense business to British Aerospace, it is expected to gain access to another $4.5 billion in cash. The British Aerospace deal is slated to close in mid-summer.

GEC’s experience with medical imaging acquisitions has made the company more amenable to investments in this industry, Donovan said. The purchase of Elscint’s CT division, its largest imaging purchase to date, has gone better than expected.

“We are very satisfied with the success of the Elscint acquisition,” Donovan said. “That has certainly raised our confidence level, not only in being able to select acquisition targets and bring them to a successful completion, but also to manage the integration process, which is where an awful lot of acquisitions go wrong.”

Donovan has used Nolan’s departure as an opportunity to conduct a strategic review of Picker’s businesses. While Donovan characterized 1998 as the most successful year Picker has ever had, there are always areas in which successful companies can improve. One sector that will probably receive added emphasis is healthcare information technology, he said. A sign of this direction is the company’s establishment of its HealthCare Information Systems unit last month.

As for Nolan’s replacement, Picker is in no hurry to bring on a new executive. Donovan’s first priority is to review the company’s operations, then find a replacement, from within Picker, within GEC, or outside the company. Donovan believes a new chief executive could be hired by August. Once that person is on board, Donovan will continue to oversee Picker in his position as chief executive of Marconi Systems, the GEC business unit that includes Picker and two other businesses, Gilbarco and Videojet.