Picker and GE complete deals to acquire Elscint business units

Acquisitions are finalized just days before start of RSNA conference

It went down to the wire, but Picker International and GE Medical Systems achieved their goals of acquiring Elscint's CT, nuclear medicine, and MRI business units in time for this month's Radiological Society of North America meeting. Picker completed its deal to buy Elscint's CT unit on Nov. 27, while GE picked up the Israeli company's nuclear medicine and MRI units on Nov. 25.

Picker ended up paying $265.9 million to Elscint's parent, Elbit Medical Imaging of Haifa, Israel, while GE paid $100 million for the two businesses it bought. Elbit is believed to have sought the divestitures as the result of recent profitability problems at Elscint, which had a 29-year history in the medical imaging market as an independent company.

GE and Picker essentially divided Elscint employees by modality, according to Peter Annand, general manager and COO of Elscint's U.S. subsidiary in Rockleigh, NJ. Essentially all of Elscint's sales, service, and applications specialists received job offers, as well as product managers and even vice presidents. The jobs of about two dozen administrative personnel in the Rockleigh office are in question, because that location will probably be closed.

Both GE and Picker have indicated that they will maintain Elscint's manufacturing operations in Haifa. Picker, for example, plans to take over the same buildings formerly occupied by Elscint's operations, according to Gary Kaufmann, director of marketing and sales for Picker's CT division. Elscint will remain in truncated form as a manufacturing business that will provide components to both Picker and ELGEMS, the Israeli joint-venture company that supplies GE with nuclear medicine systems.

The deal has already wrought major changes on the medical imaging industry. The most dramatic of these changes are in CT, which was Elscint's strongest modality. Gaining access to Elscint's product line and engineering and service talent will give Picker a major boost in its quest to build its share of the $1.6 billion global CT market from 15%, where it is today, to 25% in 2003. The acquisition also gives Picker access to a multislice CT scanner, Mx8000, that is ready for prime time. Finally, it gives the vendor a leg up in developing the next generation of multislice technology, using large-area detectors and cone-shaped x-ray beams.

Picker has hired essentially all Elscint's 650 CT employees and has established a new subsidiary, Picker Israel Ltd., that will occupy Elscint's former headquarters in Haifa. Picker is in the process of dividing up R&D duties between its Cleveland headquarters and Picker Israel.

Picker deliberately chose to retain Elscint's CT talent; gaining access to the company's engineering, sales, and service personnel was the primary goal of the acquisition, according to Kaufmann.

"In many acquisitions or mergers, companies start looking right away for redundancies and where to cut out a little fat," Kaufmann said. "Not so in this case. This was very carefully researched so that we knew the resource we were obtaining. Our chief consideration was gaining Elscint's people, and primarily their engineers."

R&D work will be divided between Cleveland and Haifa on a project-by-project basis, with different R&D groups assigned projects based on their areas of expertise, according to Shabtai Samoilov, a former Elscint executive who is now manager of multislice products at Picker Israel. Samoilov believes that Picker's newfound R&D muscle-the company now employs 300 CT R&D engineers-will give Picker an advantage over other companies, especially as Picker's strength in clinical applications is merged with Elscint's experience in engineering.

"We have found in Picker a company that is clinically oriented, with Venue and PinPoint and other products," Samoilov said. "Haifa probably could learn from them as far as clinical orientation."

GE's new businesses. In addition to MR design and manufacturing capabilities, GE's acquisition brought some 450 staff into the GE fold, covering sales and service capabilities for both MR and nuclear medicine.

A key asset is Elscint's distribution network, according to Gene Saragnese, GE's general manager of global MR. Elscint's strength in international distribution is complementary to GE's distribution network.

"Elscint is strong today in Europe and South America. These are areas where we can use additional resources and coverage," Saragnese said.

Other strengths are in Elscint's MR technology. Although GE already addresses market opportunities at high- and mid-fields, including open and short-bore systems, some Elscint products offer unique capabilities. One is Prima 1TG, a 1-tesla system incorporating two sets of actively shielded gradients integrated into the magnet bore. This twin-gradient technology allows a wide field-of-view to be honed down to a smaller volume with consequent increases in resolution.

The system could prove valuable to GE because of the specialization of the MR industry, with systems being optimized for specific applications, such as cardiac and neuroimaging. Clinical studies with Prima 1TG may help GE executives determine where this product and its offspring might best fit.

Like Picker, GE sees Elscint's engineering expertise in Haifa as critical to the further development of this and other Elscint technologies, and GE has kept the majority of the staff in Haifa, Saragnese said. Although there is some redundancy, the company plans to continue development work in Israel.

"We clearly have a global development team," he said. "This is simply an extension of the team."

On the nuclear medicine side, GE is also taking measures to integrate Elscint's nuclear business, according to both GE and Elscint executives. GE has hired the majority of Elscint's nuclear medicine employees, said Beth Klein, general manager of GE's global nuclear and PET businesses.

"We've kept the team intact moving over to GE," Klein said. "It was always our intention to bring Elscint talent along (in the deal)."

Due to GE's and Elscint's existing joint venture, ELGEMS, GE hopes the process of incorporating Elscint's facilities into GE operations will proceed smoothly. The company intends to use the ELGEMS facility as an R&D, engineering, and manufacturing hub for its nuclear medicine business, and to invest more capital in the venture, Klein said. Elscint's Israeli operations will continue to manufacture and sell components to Picker and ELGEMS, according to Annand. The two companies have established a transition team for Elscint's New Jersey site to cover the next six months of integrating Elscint's business.

In terms of its product line, GE will continue to sell Elscint's backlog of MagiCam and VariCam systems, which are essentially the same products as GE's Millennium MG and Millennium VG cameras, respectively. Once these units are sold, GE will market the cameras under the VG and MG names, with GE colors.

GE will also continue to sell its Genie and Elscint's XPert nuclear medicine workstations, which share the same hardware but use different software. GE will support both workstations' software in 1999 and will release upgrades in time for the Society of Nuclear Medicine show. However, for 2000, GE plans to incorporate XPert's clinical protocols and Genie's machine interface capabilities into one NT-based workstation, marketed under some combination of the two station's names.