Terumo Setting its Sights on Blood Transfusion Equipment Market

Second-best is just not good enough for Terumo Corp.

In an attempt to become the global leader in blood transfusion equipment, Japan’s largest medical device manufacturer recently purchased Gambro AB’s CaridianBCT unit for $2.63 billion, including debt. The purchase price is about 15 times CaridianBCT’s 2010 earnings before interest, taxes, depreciation and amortization, the companies said in a March 7 statement to the Tokyo Stock Exchange. Terumo plans to fund the acquisition with cash and bank loans.

Terumo’s purchase of CaridianBCT from Gambro will catapult the company to the top of the global blood transfusion market (it was the fifth-largest player before the deal), analysts said. Gambro is jointly controlled by Swedish industrial holder Investor AB and private equity funds manager EQT IV. “Terumo has been trying to boost its blood transfusion-related operations and the deal is expected to help it,” Satoru Takaoki, chief analyst at Tokyo securities firm SMBC Friend Research Center, told Reuters.

Though Terumo’s chief impetus behind the purchase was its desire to become the world’s largest manufacturer of blood transfusion equipment, analysts claim the deal also highlights an aggressive push by Japanese companies to capitalize on a strong yen and purchase overseas assets to expand outside their maturing home base. Up nearly 10 percent against the dollar in the last year, the strong yen is bolstering the purchasing power of Japanese companies searching for U.S. and European targets, according to Bloomberg News.

And Japanese companies clearly are taking advantage of the yen’s improved fortunes: Three companies (including Terumo) have acquired foreign firms in the last three weeks. Kyowa Hakko Kirin Co., a unit of Japanese beverage maker Kirin Holdings Co., inked a deal on Feb. 21 to purchase Scottish biotech firm ProStrakan Group Plc for 292 million pounds ($475 million). ProStrakan Chairman Peter Allen said the sale was in the best interests of the company and its shareholders. “The fit between ProStrakan and KHK is unmistakeable in terms of products, geography and infrastructure,” he noted.

One week later, on Feb. 28, drug maker Daiichi Sankyo Co. Limited purchased Berkeley, Calif.-based pharmaceutical firm Plexxikon Inc. for as much as $935 million. The deal, according to Daiichi executives, will “accelerate” the company’s entry into the oncology market.

Terumo executives claim the deal for CaridianBCT will help the company generate 70 billion yen ($850 million) in annual sales from its blood transfusion operations, though the company has its sights set on a much higher number: 1 trillion yen within 10 years. Terumo reported group revenue of 316 billion yen in the fiscal year ending March 2010. The firm reported 66.7 billion yen in cash and deposits as of Dec. 31.

Terumo’s transfusion division sells mostly low-tech products such as blood bags, blood filters and aphaeresis systems that are used to separate blood components. Lakewood, Colo.-based CaridianBCT manufactures machines that collect blood components and filter pathogens; these machines are used by both blood banks and hospitals.

CaridianBCT’s annual sales have expanded an average of 12 percent since 2000, reaching $524 million last year.

Terumo expects to complete the acquisition by early May.