The all-cash transaction is expected to be funded through available cash and additional financing of term loans and high yield securities. The transaction is expected to be completed in the second half of calendar 2012.
The transaction delivers a strong growth profile with attractive economics and is expected to be $0.20 accretive to Hologic's adjusted earnings per share in the first fiscal year after close and significantly more accretive thereafter. Hologic also expects the transaction to accelerate top and bottom line growth rates. The combined company expects to realize approximately $75 million in cost synergies within three years following the close of the transaction. In addition, the combined company expects to have strong free cash flows, which will be used primarily to reduce debt with the expectation to return to pre-transaction leverage levels within three years.
Gen-Probe is a leader in molecular diagnostics products and services, making it a highly complementary addition to Hologic's growing diagnostics portfolio. The combined company will have pro forma LTM revenues of approximately $2.4 billion, adjusted EBITDA of $822 million (excluding synergies) and offer a wide spectrum of health products globally. The transaction allows Hologic to combine Gen-Probe's superior automation platforms of TIGRIS and PANTHER and extensive menu of sexually transmitted disease (STD) tests, including the APTIMA line of Chlamydia/Gonorrhea (CT/NG), human papillomavirus (HPV) and Trichomonas products, with its strong global market presence and distribution - all targeting women's health. In addition, Gen-Probe's PROCLEIX line of HIV, HCV, HBV, and West Nile Virus (WNV) blood screening products and strong partnership with Novartis provide an attractive market, with a global reach and significant growth opportunities for the combined company. The combined company expects to create additional value through significant cross-selling opportunities, utilizing the combined global sales force and complementary research and development (R&D) and operational capabilities.
Rob Cascella, President and Chief Executive Officer of Hologic, said, "Gen-Probe is an ideal partner and strategic fit to Hologic's existing diagnostics business and complements our focus on scaling and diversifying our diagnostics franchise. Gen-Probe is a unique player in molecular diagnostics, with best-in-class technology, including the differentiating automation capabilities of TIGRIS and PANTHER, a broad menu of tests, such as the recently approved APTIMA HPV and Trichomonas assays, and a leading blood screening business. This transaction establishes Hologic as a premier company in STD diagnostics and advances our core focus on women's health. With unique capabilities and an impressive new product pipeline, our combined company will be well positioned globally to capitalize on the fast-growing molecular diagnostics market with an established global infrastructure."
Mr. Cascella continued, "Through this compelling transaction, we will achieve critical mass in our core diagnostics business and meet the needs of our customers with a broader portfolio of diagnostics technology, automation and connectivity solutions. With the combination of our capabilities, Hologic will operate a diagnostics franchise with the growth potential similar to our breast health franchise."
Carl Hull, Chairman and Chief Executive Officer of Gen-Probe, said, "This transaction provides compelling cash value for our shareholders and represents an outstanding opportunity for our business. Together, Gen-Probe and Hologic will be very well-positioned to pursue a complete range of diagnostic opportunities in women's health, with a stronger focus on the dynamic molecular diagnostics market. Specifically, we are excited about the opportunity to increase demand for our APTIMA women's health products based on Hologic's global commercial presence. Our employees will benefit as part of a larger diversified organization with the necessary scale and resources to be a leader in today's rapidly evolving global healthcare marketplace."
Strategic Benefits of the Combination
Enhances breadth of molecular diagnostics portfolio: Gen-Probe's impressive, fully automated product franchise complements and broadens Hologic's offerings in women's health and diagnostics. Gen-Probe adds the marketed instrument brands TIGRIS and PANTHER, as well as the APTIMA line of CT/NG, HPV and Trichomonas assays, to Hologic's diagnostics portfolio. In addition, exciting new products in infectious disease testing and transplant diagnostics provide opportunities for future growth outside of women's health.
Expands international presence: The combined company will benefit from a broader global presence doing business in a total of over 150 countries. Hologic intends to market Gen-Probe's products on a global basis, focusing in both developed and emerging markets around the world. With Hologic's direct sales and marketing structure in Europe, and its investment in China distribution, the growth trajectory of Gen-Probe's products is significantly enhanced. In particular, Hologic has over 500 employees focused on diagnostics in China.
Cross-selling opportunities: The combined company anticipates significant cross-selling opportunities within its diagnostics franchise due to Hologic's extensive channel coverage and the addition of Gen-Probe's best-in-class assays. Hologic's physician sales team will be instrumental in growing test utilization, driving compliance and communicating screening guidelines to increase overall organic growth.
Positions combined company for sustained growth: It is anticipated that recent new product introductions will provide sustainable growth for the next several years. In addition the combined pipeline of ongoing initiatives are expected to provide growth into the future.
Experienced management team and employees: The combination of these businesses brings together the experienced leadership of two successful companies capable of sustaining long term future growth.
Financial Benefits of the Combination
Strong financial profile and diversified revenue mix: The pro forma LTM revenues of the combined company total approximately $2.4 billion with combined adjusted EBITDA of $822 million, excluding synergies. The combined company will have a diversified portfolio of products with a core focus on diagnostics and breast health, and solid positions in surgical, blood screening and skeletal markets.
Delivers significant synergies: Hologic expects to realize annual cost synergies of approximately $75 million within three years following the close of the transaction, with approximately $40 million anticipated in the first year after the close of the transaction. Savings are expected to be realized through the alignment of assets to maximize efficiencies and overhead consolidation. In addition, it is anticipated that cross selling opportunities will provide potential for further meaningful revenue enhancement.
Accretive to earnings: Hologic expects the combination to be $0.20 accretive to Hologic's adjusted earnings per share in the first fiscal year after close and significantly more accretive thereafter. Hologic also expects the transaction to accelerate top and bottom line growth rates.
Robust free cash flows: The combined company expects to have strong free cash flows, which will be used primarily to reduce debt, with the expectation to return to pre-transaction leverage levels within three years.
Financing The all-cash transaction is expected to be funded through available cash and additional financing of term loans and high yield securities. Hologic has secured fully committed financing from Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC.
Headquarters and Management Following the close of the transaction, Gen-Probe will become a wholly-owned subsidiary of Hologic. Hologic will retain its headquarters in Bedford, Massachusetts, and the combined company will maintain a significant presence in San Diego, California.
Rob Cascella will continue as President and Chief Executive Officer of Hologic and Carl Hull, Chairman and Chief Executive Officer of Gen-Probe, will oversee the company's combined diagnostics business.