Imation to buy Cemax-Icon in consolidation of PACS partners

Cemax-Icon to be run as wholly owned subsidiary

PACS market consolidation took another turn this month when film and digital imaging giant Imation agreed to acquire PACS software developer Cemax-Icon. The deal is the latest development in an ongoing series of strengthening relations between the two medical imaging companies.

Under the plan announced May 14, Cemax-Icon of Fremont, CA, would become a wholly owned subsidiary of Imation, the Oakdale, MN-based company that was spun off from 3M in 1996. Cemax-Icon president and CEO Terry Ross would remain as head of the subsidiary, with the company staying at its existing headquarters. Imation has not yet decided whether to keep or retire the Cemax-Icon brand name.

Imation agreed to pay $30 million for Cemax-Icon, with additional payments totaling up to $49 million over the next two years if Cemax-Icon meets milestone targets based on sales of its products. The agreement gives Cemax-Icon the backing of a $2.3 billion corporate giant that possesses extensive marketing expertise and distribution channels through which Cemax-Icon's products can be sold.

3M's involvement with Cemax began in 1994, when the company signed an OEM deal for sales and marketing of PACS components. 3M increased its involvement after Cemax merged with Icon in 1995 by making a large equity investment in the company (SCAN 6/21/95). At the time of last month's merger announcement, Imation already owned just under 20% of Cemax-Icon.

Ross said that the ultimate goal of Cemax-Icon's long-term business plan has been for his company to either go public or be acquired by a larger firm. While the company has enjoyed remarkable revenue growth in recent years, it has found its prospects limited by its status as a relatively small, privately held firm.

"Our growth has always been limited by our working capital, never by our competition," Ross said. "What the marriage with Imation does is remove that problem, and it provides a huge service and sales channel, in addition to the current channel, to explode our market opportunities."

For Imation, the acquisition will increase the company's position in digital image management, widely acknowledged as one of the hottest growth areas in medical imaging. The company hopes to achieve synergies by integrating the Cemax-Icon product offerings with its own products, such as the DryView dry laser printer and removable digital storage media, according to Cliff Pinder, vice president of medical imaging systems at Imation.

"We are confident that by tying their solutions together with our own storage capabilities and our networking printer expertise, we can provide better solutions to the market and accelerate our own business growth," Pinder said.

The agreement may have some ramifications for Cemax-Icon's web of OEM alliances, which has expanded rapidly in recent years. Ross expects that some of the less active relationships will wither, but that other more important relationships, such as a recent agreement with Picker International of Cleveland, will continue to blossom. Cemax-Icon and Picker signed an OEM deal in March in which Picker agreed to purchase what Ross described as a sizable amount of Cemax-Icon products (SCAN 3/19/97).

Picker views the Imation acquisition as good news, because it will make Cemax-Icon a stronger business partner, according to David Talton, general manager of Picker's image management division. In addition, Picker already has a relationship with Imation: Picker's Health Care Products subsidiary distributes a range of Imation offerings, such as the DryView printers and Imation film.

"There is not an effect on our relationship (with Cemax-Icon)," Talton said. "It is still the same relationship that we agreed to a few months ago."