GE to acquire Vital Signs for $860 million cash

Tag : Equipment Values

General Electric Co (GE.N: Quote , Profile , Research ) said on Thursday it would acquire medical-device maker VitalSigns Inc (VITL.O: Quote , Profile , Research ) for $860 million, a move to expand its $17 billion health careoperation into the single-use products market.

By buying Vital Signs, GE, which makes high-tech medical equipmentsuch as machines that administer anesthesia, gets access to anadditional revenue stream -- consumable supplies that must bereplaced with each patient.  "Equipment is like an automobile and the single-use product is sortof like the gasoline," explained Terry Wall, chief executive ofTotowa, New Jersey-based Vital Signs.

"For every operation you obviously need an anesthesia machine,"said Wall, "but your machine is going to last you five to 10 yearswhere every single operation you need a new single-use anesthesiacircuit."

Vital Signs shares surged on the news of the $74.50 per share cashoffer, a 28.4 percent premium to Vital Signs' $58 close on theNasdaq on Wednesday. The offer is above the shares' 52-week high of$61.20 reached on May 9.

Omar Ishrak, president and CEO of GE Health Care's clinical systemsunit, said that the deal, due to close in the fourth quarter, wouldbe a boost to earnings next year at the second-largest U.S. companyby market capitalization.  "We expect this business to grow at double-digit rates," Ishraksaid. Vital Signs last year earned $19.2 million on $205.3 millionin net revenue, which takes into account the effect of rebates onthe company's products.
 
GE said the deal values Vital Signs at $860 million net of cash andinvestments. It said that shareholders with a 37 percent stake inVital Signs have agreed to vote in favor of the deal.