Philips to Buy Marconi's Medical Unit for $1.1 Bln (Update1)
By Cecile Daurat
Amsterdam, July 4 (Bloomberg) -- Royal Philips Electronics NV, Europe's largest consumer electronics maker, agreed to buy Marconi Plc's Medical Systems business for $1.1 billion cash to become the world's No. 2 maker of diagnostic imaging equipment.
Marconi's unit, with $1.6 billion of sales in fiscal 2001, will bolster Philips's line of equipment to provide images of what's going on in the body so doctors can diagnose diseases.
Philips will have spent more than $5 billion in two years to catch up with General Electric Co. in medical systems. Marconi, whose shares were suspended ahead of a statement on its outlook, is selling assets to focus on telecommunications gear.
``It's a very cheap price for Philips,'' said Bert Maes, an analyst at Delta Lloyd Securities who rates Philips shares ``hold.'' ``Marconi needs the money. It's not going well in their telecoms business, where the whole sector is doing badly.''
Shares of Amsterdam-based Philips, which also makes semiconductors, light bulbs and televisions, fell as much as 74 cents, or 2.3 percent, to 31.36 euros ($26.6).
Philips plans to sell Marconi's Healthcare Products, one of the largest distributors of radiology imaging supplies in the U.S., the company said in a statement sent by e-mail. The unit reported revenue of $600 million in the year ended March 31.
The purchase will add to Philips earnings from 2003, said spokesman Ben Geerts. Philips has said it may report its first annual loss in five years in 2001 as sales of semiconductors slow.
Outlook
Marconi spokesman Mel Foster wouldn't comment further ahead of a company board meeting later today. Shares of Marconi have lost two-thirds of their value this year. The company lost money in the quarter through March as it spent more to develop new products while sales of network equipment slowed. It said in May that an improvement in the following six months was unlikely.
In addition to the acquisition, Philips agreed to buy as much as $150 million of communications equipment and services from Marconi over five years.
Philips agreed to buy several makers of medical equipment and software in the past year, including Agilent Technologies Inc.'s medical business for $1.7 billion in November to add home diagnostic equipment.
The market for medical equipment, dominated by General Electric with a 22 percent market share, is expected to grow about 10 percent a year, driven by ageing populations and an increasing need of diagnostics gear to identify medical problems at early stage, according to Lehman Brothers analysts.
Today's purchase ``basically completed its acquisition program'' in the sector, Philips said. The company expects to complete the acquisition in the fourth quarter. It expects to complete the Agilent purchase in the third quarter.
Marconi, formerly a defense-equipment maker known as General Electric Co. Plc, in recent years has been selling assets to transform itself from a diversified defense and engineering company into a maker of high-speed phone equipment.
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