Business Developments: Circon bid dropped; other deals completed

BBI Newsletter, The, Oct 1, 1998

U.S. Surgical (USS; Norwalk, Connecticut) last month withdrew its $221 million offer to purchase Circon (Santa Barbara, California), ending one of the longest takeover attempts in memory. The final USS bid of $16.50 per share expired Sept. 15, with the sur-gical supply firm saying it had given up the chase because of its own acquisition by Tyco International (Exeter, New Hampshire), an avid acquirer that avoids the hostile takeover route.

Ironically, the Tyco/USS merger could change the Circon takeover bid from hostile to friendly. Before USS dropped its offer, Circon said it was seeking a "white knight" as an acquirer, and Tyco could be among the potential bidders. An industrial conglomerate, Tyco spent $3.3 billion to acquire USS and has gobbled up more than 100 companies over the past four years. USS launched its bid for Circon in August 1996, an apparent attempt to bolster and broaden its prod-uct line in minimally invasive OR instrumentation and to improve its competitive position against John-son & Johnson in that market. USS a year ago suc-ceeded in unseating two of Circon's board members, one of them being Richard Auhll, company president and CEO. USS had made what appeared to be a final push to gain control of the Circon board this past May, but then agreed to be purchased by Tyco. As the dust in this fray appeared to be settling, the end of summer saw several other large deals com-pleted or nearing consummation: * Pfizer (New York) carried out two major spin-offs last month as it continued on its path to becoming a pure pharmaceutical enterprise. It completed the $130 million sale of American Medical Systems (Hopkins, Minnesota), a urological prosthesis busi-ness, to E.M. Warburg, Pincus & Co. (New York), and it completed the sale of Schneider Worldwide, an interventional device unit, to Boston Scientific (Nat-ick, Massachusetts) for $2.1 billion. Boston Scientific said the purchase of Schneider will be "modestly dilutive" to results in 1999. Schneider Worldwide (Bulach, Switzerland) was part of Pfizer's Medical Technology Group and had sales of $330 million last year. * A big cardiovascular sector deal that moved ahead in September was Guidant's (Indianapolis, Indiana) planned purchase of atrial defibrillation device maker InControl (Redmond, Washington). Guidant completed its cash tender offer for InCon-trol's shares at $6 each, accepting for payment all 21.3 million tendered shares. The shares tendered repre-sent about 97.7% of InControl's outstanding stock. Guidant will integrate InControl into its Cardiac Rhythm Management Group (St. Paul, Minnesota). * Two divisions of General Electric (GE; Fair-field, Connecticut) have agreed to purchase three business units of Elscint (Haifa, Israel), a subsidiary of Elbit, for a combined total of $375 million. Picker International, an English subsidiary of GE, will pur-chase Elscint's Computed Tomography Division for $275 million, and GE Medical Systems (Waukesha, Wisconsin) will buy the company's nuclear medicine and magnetic resonance units for $100 million. Assuming the deals are completed, Picker will keep Elscint's research and development division and manufacturing operations in Israel. GE Medical Sys-tems also will seek to acquire the sales and service operations of Elscint's CT and MRI units. GE's strat-egy to obtain Elscint was signaled this past April, when GE Medical Systems bought Elscint's ultra-sound operations and created Elgems, a joint venture for developing a pipeline of nuclear medicine prod-ucts. As these deals were laid out, Elscint reportedly was negotiating the piecemeal sale of more of its divi-sions, specifically its CAT scan business and mam-mography unit. GE Medical in mid-September also completed the purchase of InnoServe Technologies (Dallas, Texas), a provider of medical equipment management and maintenance programs, for $16 million in cash. * Gull Laboratories (Salt Lake City, Utah) agreed to a merger with Meridian Diagnostics (Cincinnati, Ohio) under which Gull's shareholders will receive $2.25 a share. The initial deal announced in July (see BBI News, July 30, 1998) had pegged the purchase price at $3 a share, but Meridian later said it wanted to change the terms of the offer after Gull posted a second-quarter loss of $1.3 million (see BBI News, Sept. 3, 1998). Gull reported that its majority share-holder, Germany's Fresenius AG, agreed to vote in favor of the merger, and a special meeting will be held later this month for Gull Labs shareholders to vote on the merger. Y2K non-compliers' names to be posted In an attempt to prod medical device manufac-turers into publishing the Year 2000 status of their devices - which, so far, many have failed to do - the FDAhas begun posting the names of those companies on its web site. In a Sept. 2 letter, Bruce Burlington, MD, director of the agency's Center for Devices and Radiological Health (CDRH), set a Sept. 22 deadline, after which it planned to begin identification of those companies not complying. Those providing Y2K information on the agency's web site are to give it in one of five categories: * That medical devices manufactured by a com-pany "are not Year 2000 vulnerable" - that is, they do not use software vulnerable to the Y2K bug. * That the medical devices a manufacturer has made and sold "are all Year-2000 compliant." * That the manufacturer is "providing specific information regarding those products that are not com-pliant or whose assessment is currently incomplete." * That the manufacturer is "working on an assess-ment and will post the results" by a specific date. * That the manufacturer is responding "under a different business name and the name to which [the] letter was sent should be deleted" from the FDA's list. If that information is not reported, the agency "will state that the manufacturer has not supplied it." White wins three-way race at Abbott In a corporate power contest, Abbott Laboratories (Abbott Park, Illinois) has chosen a winner, appointing Miles White as CEO of the company. Along with White, Robert Parkinson Jr. and Paul Clark in January were named as a troika of executive vice presidents in a succession strategy to determine which would be best for the top spot. Parkinson will take second in command as president and COO, and Clark - appar-ently unwilling to take third place - announced his resignation effective at year-end, though agreeing to assist in the transition through that point. White's selection came as a minor surprise, since Clark has been guiding Abbott's pharmaceutical divi-sion, which has shown the largest revenue growth over the past five years, at about 20% annually. By comparison, White had headed the diagnostics divi-sion of the company, a unit growing yearly only in the low single digits. Parkinson had headed the interna-tional division, with growth rates of from 10% to 15%. In the transition, Duane Burnham, chairman and CEO, will continue as Abbott's chairman until his retirement in April 1999, at which time White will be elected chairman as well as CEO. Thomas Hodgson, currently president and COO, will retire at the end of this year. White has been with the company 14 years, first in sales and marketing, and then holding various man-agement positions in marketing, R&D and manufac-turing. He was elected vice president of the company's diagnostic systems and operations in 1993 and senior vice president of diagnostic operations in 1994. Of the three contenders, Parkinson has the longest tenure with Abbott, 22 years. He served in various manage-ment, marketing and sales capacities and in 1990 was elected vice president, European operations, in the international division; senior vice president, chemical and agricultural products in 1993; and senior vice pres-ident, international operations, in 1995.