The spin-off into Varex Imaging Corporation is still to complete, yet Varian Medical Systems (NYSE: VAR) has agreed to acquire the medical imaging business of Perkin Elmer Inc. (NYSE: PKI), incorporating it into the publicly traded spin-off. The deal, with a value of $276 million, was announced on December 22nd 2016 and is expected to close after the planned separation of Varex from Varian at the end of January.
Through the acquisition, Varex will benefit from Perkin Elmer’s portfolio of flat-panel detectors for general radiography, mammography and tomosynthesis imaging, as well as detectors used for dental and veterinary applications. Additionally, the deal will provide Varex with cross-selling opportunities, whilst complementing existing imaging components with new imaging solutions. Overall, it will broaden its product offering available to customers.
As part of the deal, once closed, Varex will have the chance to add GE Healthcare, amongst others, to its list of customers, as Perkin Elmer has existing digital imaging agreements with the company. Building on existing customer relationships, in addition to developing new customer partnerships, will be a strategy for Varex to help achieve its target of above-market growth.
This acquisition is likely to be one of many deals that Varex plan to make over the coming year. In late November 2016, the company shared its merger and acquisition plans, detailing its intent to acquire a number of smaller players in the industry to assist in meeting growth targets.
The number of competitors in the flat-panel detector market has increased considerably over recent years, increasing the availability of both the panel material and a wider range of sizes. Most recently, LG entered the medical imaging market, launching new flat-panel detectors at RSNA 2016, to add to the competition. Increased competition, in addition to lower manufacturing costs, are resulting in the prices of detectors falling considerably.
2017 will see further activity in the dynamic market of flat-panel detectors. Low cost Asian suppliers are pushing prices down and making it difficult for manufacturers based in other regions to compete. Realistically, the selling prices of these products will not be able to continue to fall at the current rate, as detectors become commoditised and are included in larger purchasing packages. As Varex has suggested, further merger and acquisition activity should be expected through 2017; and the ebb and flow of the fortunes of flat-panel detector manufacturers will continue.