BOSTON (MarketWatch) — Shares of Cytyc Corp. soared Monday, rallying in reaction to a weekend deal in which Hologic Inc. agreed to buy the company for $6.2 billion.
The cash-and-stock acquisition is aimed at creating a broad-based provider of diagnostic technologies and therapies for women’s health.
Terms call for Hologic
to pay $16.50 in cash and 0.52 of its own shares for each share of Cytyc
Based on Friday’s clsoing prices, the deal would value Cytyc at $46.46, a 33% premium.
Cytyc’s shares gained 21% to stand at $42.50 in midday trading. Hologic investors, mindful of dilution, were less enthused with the deal, pushing down shares by 7% to $53.36.
The companies see cross-selling opportunities from putting together firms involved in screening, diagnostics and therapeutics for women’s heath.
Cytyc is best known for its Pap-smear tests for cervical cancer, while Hologic’s main business is digital mammography. The combined firm will have more than 3,000 employees.
Cytyc currently holds about 70% of the U.S. Pap-smear market, according to Sun Trust Robinson Humphrey.
According to analysts at Banc of America, the merger will create a “premier women’s health franchise.”
Upon the deal’s completion, Cytyc shareholders will hold 55% of the firm and Hologic will own 45%. Hologic will keep its headquarters in Bedford and Cytyc will be based in Marlborough, both of Massachusetts.
The firms foresee opportunities to increase revenue by more than $75 million a year in the first three years, and to cut costs by $25 million to $30 million.
For Hologic’s fiscal 2008, combined revenues are expected to be in excess of $1.7 billion, and combined adjusted earnings per share are expected to be in the range of $2.35 to $2.40.
Patrick Sullivan of Cytyc will be chairman and Jack Cumming of Hologic will be chief executive of the newly-merged company.
A Banc of America Securities analyst said Monday that the merger should allow Hologic to dominate the market for women’s health diagnostics.
“Cytyc will not only help Hologic significantly broaden its product offerings by adding products for cancer screening & treatment and other women’s health applications, but it will also transform Hologic from a predominately capital-equipment company into one with close to 50% of its revenues coming from disposable consumables,” wrote the analyst, Glenn Novarro, in a research note.
Novarro added, “Strong base business fundamentals combined with the Cytyc acquisition will allow Hologic to dominate the marketplace and become a premier women’s health franchise. We expect the combined company to generate 20%-plus EPS growth over the next three years.”
Goldman Sachs advised Hologic, with Jefferies & Co. providing a fairness opinion, while Morgan Stanley and J.P. Morgan Chase advised Cytyc.
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