Beckman Coulter Faces Criticism and a Credit Review after Biosite Announcement

Shares of biomedical equipment manufacturer Beckman Coulter lost 6.8% to close at $62.51 yesterday, their steepest drop in seven months, after the company announced it will pay a substantial premium to purchase Biosite, a manufacturer of diagnostic tests. Biosite's shares shot up 51% to close at an all-time high of $83.80. Beckman has offered $85 per share for Biosite, a 53.5% premium to Biosite's Friday close. The price has prompted criticism that Beckman is paying too much as well as a review by all three credit rating agencies. The acquisition will give Beckman a leading position in cardiac immunoassays, but the leverage required to finance the purchase has raised concern. Further, Beckman will be paying five times Biosite's trailing 12-month revenue of $308.6 million, while recent similar acquisitions have been more in the range of three times revenue. Piper Jaffray analyst William Quirk: "With Beckman's revenue more exposed to the maturing BNP market [BNP is a cardiac immunoassay jointly developed by the companies], we believe this acquisition will be dilutive to Beckman's earnings per share through 2008." Counters Beckman CEO Scott Garrett: "We got favorable borrowing terms, and Biosite is the best company in our industry when it comes to developing new tests and taking advantage of the explosion in the life sciences industry."

Sources: Business Week, Forbes, MarketWatch, Bloomberg
Commentary: Beckman Coulter to Acquire Biosite Inc. for $1.55 Billion • A Hefty Price for Biosite [Business Week]
Stocks/ETFs to watch: Beckman Coulter Inc. (BEC), Biosite Inc. (BSTE). Competitors: Abbott Laboratories (ABT), Dade Behring Holdings Inc. (DADE), Thermo Fisher Scientific, Inc. (TMO). ETFs: Rydex S&P Smallcap 600 Pure Growth (RZG)
Conference call transcripts: Biosite Q4 2006

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