GE pays $2.1B for Instrumentarium, expand its Medical Systems division

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General Electric Co. agreed to buy Finland’s Instrumentarium Oyj for 2 billion euros ($2.1 billion) in cash, adding anesthesia equipment to its GE Medical Systems unit. Instrumentarium shareholders will get 40 euros a share, 47 percent more than the company’s closing price yesterday, the Helsinki-based company said in a statement. GE Medical, with about $9 billion in sales this year, would add $1 billion more to extend its lead as the world’s largest medical-equipment maker. The purchase will help General Electric keep pace in Europe with Siemens AG, which formed a joint venture in May for medical services including anesthesia monitoring products. GE Medical has a30 percent of the 3.5-billion-euro European medical technology market, while Siemens and Philips Electronics NV each have 20 percent, according to Germany’s Association of Medical Technology. “It’s a good time to acquire a company,” said Thomas Thaler, a medical technology analyst at Bank Julius Baer in Zurich. General Electric Chief Executive Jeff Immelt is “pushing to expand offerings in Europe and bring over the technology from Instrumentarium to the U.S.” At least 76 acquisitions involving medical technology companies in the past six years drew a more than 40 percent price premium, according to Bloomberg data. Greg Lucier, who heads GE Medical’s Information Technologies unit said Instrumentarium should grow 20 percent to 30 percent annually. “We can justify the premium due to the growth,” Lucier said. “For us if we can grow it fast in excess of 20 percent a year, these type of premiums make all the sense in the world.” Doctors use Instrumentarium’s products in surgery and emergency rooms to monitor patients’ heart rates and the level of anesthesia. The world’s biggest maker of anesthesia systems also provides anesthetic gases and other surgical gear under brand names including Datex-Ohmeda, Spacelabs Medical and Deio. “The real hotspot where medical errors take place is in the operating room,” Lucier said. “None of this stuff talks to each other and doctors tell us they’re looking for a company to integrate it all together.” Instrumentarium, Finland’s largest medical-equipment maker, gets 80 percent of its sales from anesthesia and critical care equipment after buying Spacelabs Medical Inc. of the U.S. earlier this year. General Electric’s purchase eliminates a potential competitor as Immelt seeks a bigger foothold in Europe. “Instrumentarium has become a real challenger for GE’s medical unit in terms of size,” said Pekka Suhonen, an analyst at Opstock Securities in Helsinki. Sales at the Finnish company have more than doubled in the past five years. There is little overlap between Instrumentarium’s products and General Electrics and “we are not expecting a real issue” with antitrust authorities, said Joseph M. Hogan, president of GE Medical Systems. Instrumentarium, founded in 1900, started to focus on medical equipment in 1998 with the acquisition of part of BOC Group’s Ohmeda unit for about $500 million. After selling its optical retail unit in September, the company solely makes medical gear. It employs 5,400 people in Europe and in the U.S. Instrumentarium gets 43 percent of sales from Europe and an equal share in North America, according to the company’s Web site. “This is an extremely important business for GE and we plan to grow Instrumentarium even further by investing in new technologies,” Immelt said in a statement. Immelt, who formerly headed GE Medical Systems, has built up the business since becoming General Electric’s CEO. Earlier this month, GE Medical purchased Canada’s BDM Information Systems Ltd. for an undisclosed price to add sales of software that track a patient’s medical history and prescriptions. It also bought USA Instruments Inc., a supplier of coils used with its magnetic resonance imaging machines. Terms weren’t disclosed. The Waukesha, Wis.-based unit is the biggest maker of medical-imaging equipment such as ultrasound, X-ray and magnetic resonance imaging machines and competes against Royal Philips Electronics NV of the Netherlands as well as Siemens. Helsinki will become the European headquarters for GE Medical Systems Information Technologies. General Electric formed an information-technologies business two years ago to offer electronic record-keeping to hospitals, where most patients’ histories are still on paper. The information unit’s sales are projected to rise by 20 percent a year, making it GE Medical’s fast-growing business. The information-technologies business has spent more than $1.5 billion on acquisitions and technology development in those two years, including the November acquisition of Millbrook Corp. Fairfield, Conn.-based General Electric has businesses that span broadcasting, credit cards, real estate, jet engines and plastics. Sales at GE Medical Systems, which provided about $8 billion of the company’s $126 billion in revenue last year, are expected to rise about 7 percent this year, the company has said.