Hologic to Acquire Gen-Probe Medical device maker Hologic Inc. has agreed to buy diagnostic testing

Hologic to Acquire Gen-Probe
Medical device maker Hologic Inc. has agreed to buy diagnostic testing firm Gen-Probe Inc. for $3.75 billion in cash. Hologic, which focuses on women’s healthcare and makes diagnostic and breast health products and conducts minimally invasive procedures for women suffering from excessive menstrual bleeding, will gain access to Gen-Probe’s molecular diagnostics products used to screen for blood diseases and test transplant compatibility.

Hologic will pay $82.75 per Gen-Probe share, which is 20 percent higher than Gen-Probe’s closing price of $68.71 per share on April 27. Since the announcement, Gen-Probe share prices have climbed considerably, opening on April 30 at $81.84. Meanwhile, Hologic’s share prices have dropped 10 percent as traders express disapproval of the high buying price for Gen-Probe.

“It’s certainly a good acquisition for them (Hologic), but they definitely paid a lot and the street is probably reacting to the price they paid as well as the weak earnings number they put up,” Cantor Fitzgerald analyst Jeremy Feffer told Reuters.

Disapproval over the merger quickly spread from traders to shareholders. While the per-share price marks a 20 percent premium over Gen-Probe’s April 27 closing price, the deal angered enough shareholders that no fewer than 11 law firms representing them almost immediately announced investigations on May 1 focused on whether the board of Gen-Probe breached its fiduciary duties by failing to maximize shareholder value.

Gen-Probe put itself up for sale almost a year ago, with Novartis AG, Life Technologies Corp. and Thermo-Fisher Scientific Inc. counting among potential buyers. Novartis already had a partnership with the company, but as interest from other buyers fell away and the price per share rose in anticipation, Novartis pulled out of the bidding process citing an inflated price.

It’s clear from the agreed upon sale price that Hologic has no such concerns, confident that the price is fair. “The $3.7 billion proposed acquisition of Gen-Probe by Hologic looks to be at a full but fair valuation; experience over the last year suggests that a competitive bid is unlikely,” said Doug Schenkel, Cowen and Co. analyst.

The only possible roadblock Hologic faces now is approval from U.S. anti-trust authorities, who may view the acquisition as handing too much market share in diagnostics to the company. The Federal Trade Commission recently prevented Cytyc Corporation, now a part of Hologic, from acquiring Digene Corporation, now a part of Qiagen, due to competitive concerns regarding the HPV business. Hologic CEO Rob Cascella is confident the deal will be approved, noting that Hologic and Gen-Probe target different sectors within the HPV (human papillomavirus) market.

Morgan Stanley served as advisor to Gen-Probe on the transaction, while Goldman Sachs Group Inc. and Perella Weinberg Partners advised Hologic. Goldman Sachs also is providing fully committed financing to Hologic. The sale is expected to close in the second half of 2012.