Thermo Electron sells Trex to Hologic

The long-expected sale of Trex Medical became fact this month when bone-densitometry manufacturer Hologic announced that it is purchasing Trex from Thermo Electron for $55 million. In addition, Thermo Electron said it will be taking three of its other subsidiaries private.

Hologic will acquire the U.S. business of Trex in a combined cash and note deal. Hologic will pay Thermo Electron $30 million cash and will issue a secured note for $25 million over three years. Completion of the sale is expected by late September.

Industry analyst Mitch Goldburgh, general manager of Technology Marketing Group, said there was initial surprise at the low price paid for Trex.

On the other hand, he said, "The market cap is $49.98 million, so Hologic paid a premium for something. If it's not their technology, it must be their customer base. If sales are slumping, $55 million represents perceived technology assets."

Hologic said it will continue Trex's operations in mobile x-ray systems, x-ray systems for nondestructive testing, specialized imaging equipment for cardiac cath labs, and digital radiographic/fluoroscopic systems. Company officials noted that they do not expect to eliminate much duplication with the Trex merger, but will almost certainly kill Trex's charge-coupled device (CCD) technology for digital mammography, developed for its Lorad breast-imaging product line. A selenium-based flat-panel detector for mammography being developed by Direct Radiography Corp., a Hologic subsidiary, will be continued.

"Our view is that the flat panel is superior," Hologic vice president Glenn Muir said. "The Lorad type will be reviewed, but we will combine resources to shift to the newer flat-panel detector."

The Trex sale has been expected since parent company Thermo Electron said in January it was looking for a buyer. Trex's revenues have been sliding since the FDA rejected its 510(k) application last year for its full-field digital mammography unit (SCAN, 5/12/99). Imaging equipment sales for Trex were off 28% in the third quarter of this year (end July 1), and the company wrote down its principal businesses to their estimated disposal value (SCAN, 7/16/00).

"This acquisition reinforces our strong focus on women's health issues, initially including osteoporosis and expanding to breast cancer assessment," Hologic CEO S. David Ellenbogen said.

Trex's problems became public knowledge when the company reported lower than expected earnings for the first quarter of 1999 due to lower sales to U.S. Surgical, which had been a buyer of Trex's stereotactic biopsy tables. That relationship had begun to sour when Tyco International bought U.S. Surgical and informed Trex that it would not be purchasing more of the tables (SCAN, 6/10/98).

The company's troubles were compounded in December of that year, when CEO Hal Kirschner left the company, and again two days later when the FDA rejected Trex's 510(k) application for the digital mammography system. And in what may have been Trex's death knell just over a year later, GE Medical Systems received premarket approval for its digital mammography system, the Senographe 2000D (SCAN, 1/31/00).

Hologic purchased Direct Radiography last year, hoping to use DRC technology to expand into the digital radiography and PACS markets.

"We're number one in bone densitometry, and now we're acquiring mammography and the Lorad line," Muir said. "We're the leader in osteoporosis and bone cancer, all of which are linked by the movement toward digital. We're in the early stages of digital, and we have the enabling technology to apply to those businesses."

Thermo Electron simultaneously announced it has completed mergers with Thermo Ecotek, ThermoLase, and ThermoTrex, and will take those companies private. After selling off its Trophy dental imaging business based in France, Thermo Electron will focus on its core area of analytical and monitoring instruments.

Although there will be R&D interaction, other parts of Trex will be run as stand-alone operations, Muir said. Hologic's 440 employees in Bedford, MA, will be joined by approximately 550 Trex workers at its Danbury, CT, and Littleton, MA, facilities.

"We think of this more as synergies than duplication," Muir said. "When you double the size of the company, you need all hands to run the battleship."