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Diagnostic imaging company Hologic Inc. is acquiring Cytyc, a medical device manufacturer, for $6.2 billion in cash and stock. Cytyc shareholders are to receive 0.52 shares of Hologic common stock and $16.50 in cash for each share of Cytyc stock. That amounts to $46.46 per share, a 33% premium to Cytyc's Friday close. Both companies are leaders in women's healthcare: Hologic is known for its digital breast cancer screening and Cytyc for its minimally invasive surgical treatment for menorrhagia, a menstrual disorder. Cytyc's core business is Pap smear tests for cervical cancer, a business that has slowed recently as research has shown that they don't need to be done as often as was previously thought. Cytyc's device sales, particularly the menorrhagia device, have outperformed the Pap smear test business. In 2006, Cytyc posted revenue of $608 million, up 20% from the year before. Hologic's digital mammography machines, though relatively expensive, have been popular among doctors because of their crisp images. Hologic saw sales of $463 million in fiscal 2006 and its stock has risen sevenfold in five years. The transaction is expected to close in Q3 and is forecast to add to Hologic's earnings in the first year thereafter. For fiscal 2008, combined sales are projected at over $1.7 billion and combined adjusted EPS at $2.35-2.40.

Sources: Press release, Forbes, New York Times, MarketWatch, Reuters, Wall Street Journal
Commentary: Biotech Day In Review: Merger Monday [Feb 13th, 2007] • Cytyc Buys New Device; Q3 Results PromisingNegative CAD Research Shouldn't Impact Hologics, iCAD
Stocks/ETFs to watch: Hologic, Inc. (NASDAQ:HOLX), Cytyc Corp. (CYTC). Competitors: Boston Scientific Corp. (NYSE:BSX), Digene Corp. (DIGE), Koninklijke Philips Electronics NV (NYSE:PHG). ETFs: HealthShares Diagnostics (HHD), iShares S&P SmallCap 600 Growth (NYSEARCA:IJT), PowerShares Value Line Timeliness Select (PIV), Rydex S&P Midcap 400 Pure Growth (NYSEARCA:RFG)

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Source: Hologic Acquiring Cytyc for $6.2 Billion