GE makes bid for OEC Medical to broaden interventional offerings

Vendor seeks to tap strong growth in fluoroscopy, surgical x-ray

In today’s medical imaging purchasing environment, customers want access to a broad range of imaging products. This market dynamic has inspired a slew of mergers and acquisitions in the imaging sector over the last few years.

In the latest such deal, GE Medical Systems has signed a definitive agreement to acquire OEC Medical Systems in a deal valued at $480 million. OEC shareholders will receive $36 per share payable in GE stock. The actual number of GE shares each OEC shareholder will receive will be based on the trading prices of GE stock for a period of time prior to the transaction’s closing. In connection with the agreement, OEC granted GE an option to acquire newly issued shares of OEC common stock, representing 15% of its total shares outstanding, at the $36 per share transaction price.

Minority shareholder Forstmann-Leff Associates has agreed to vote the OEC shares it controls in favor of the proposed merger. Forstmann-Leff controls approximately 23% of the OEC common shares outstanding. Subject to OEC shareholder and government approvals, the deal is expected to close around the end of the year. In announcing the deal, Milwaukee-based GE cited OEC’s strong position in fluoroscopy and surgical x-ray as a key reason for its interest in the company. The deal won’t be GE’s first foray into interventional C-arms, however.

GE had entered into a supply relationship with Fischer Imaging for that firm’s Tilt-C product family over five years ago (SCAN 2/2/94). A year later, GE moved to solidify its sourcing arrangement with a cash investment of $10 million, buying itself a 19% ownership position in Fischer (SCAN 7/6/95). Shipments to GE slipped in 1997, however, a development that hammered Fischer’s financial results (SCAN 2/5/97).

GE still maintains an equity position in Fischer, and continues to sell an OEM version of the Denver-based vendor’s Tilt-C system, according to Charles Young, a spokesperson for GE.

OEC’s products will fill out GE’s C-arm portfolio, particularly with its mid-range and upper-end systems, Young said.

It’s too early to tell how OEC Medical will be integrated into GE, although the company’s Salt Lake City headquarters will be kept, Young said. When completed, the deal will mark the end of OEC Medical Systems’ long run as an independent firm. Founded in 1942, OEC started as a manufacturer of bone plates, artificial joints, and surgical tables. In 1972, the company entered the radiology field and introduced mobile C-arms to the U.S. A decade later, the company was acquired by Diasonics, but in 1993 it became one of three Diasonics holdings to be divested as independent, publicly traded companies. Of this trio, OEC Medical has been the most successful, positioning itself as the leading supplier of mobile C-arms for intraoperative and minimally invasive therapy applications. Ironically, the GE deal will bring OEC back into the same fold with Diasonics Vingmed, which GE acquired in April 1998 (SCAN 4/29/98).

OEC has shown impressive financial growth for an independent firm. For its second quarter 1999 (end-June), the firm posted revenues of $52.9 million, a 16% increase over the $45.5 million recorded in the same period last year. Net income was $4.6 million, compared with $3.9 million in 1998.

In May, OEC introduced a new line of digital mobile C-arms, called Series 9800 (SCAN 6/23/99). Designed for surgical applications that require advanced imaging capabilities, Series 9800 features real-time 1K x 1K resolution, and will be the platform for the next round of OEC product introductions. A new workstation was designed for Series 9800 in order to cope with the extra data generated by the high resolution. The workstation also features AutoTrak, a new capability that automatically tracks the subject anatomy anywhere within the imaging field to maintain an optimal image.