Investors reacted favorably over the announcement that Saluggia, Italy-based DiaSorin SpA (MIL:DIA, Financial) is paying $1.8 billion to purchase Austin, Texas-based Luminex Corp. (LMNX, Financial), a developer of proprietary biological testing technologies and products for the diagnostics, pharmaceutical and research industries worldwide. DiaSorin's shares gained about 9% to $182 on Monday.
The all-cash deal represents a price of $37 per share, or about a 12% premium over Luminex's most recent closing stock price. The modest reward to the company's shareholders is likely because Luminex shares had already been on an upward trajectory since Feb. 25, when strong rumors persisted that a deal with DiaSorin was in the works. The takeout price is just about where Luminex traded in July of last year.
MedTech Dive reported that Jefferies analysts called the deal a "reasonable" value. DiaSorin CEO Carlo Rosa was more bullish, saying that "Luminex perfectly fits with our strategy to grow our positioning in the molecular diagnostics space, to broaden our presence in the U.S., and to create additional value through life science offerings."
The deal is supposed to close in the third quarter. When it does, Luminex will be folded into a new U.S. subsidiary DiaSorin is creating. The unit will inherit Luminex's 1,300 employees worldwide and is expected to generate $1.5 billion in revenue.
DiaSorin may have been spurred to make a move because it didn't want to lose ground to Roche (RHHBY, Financial), which just a few weeks ago agreed to pay $1.8 billion to buy GenMark Diagnostics Inc. (GNMK, Financial) for its multiplex testing capabilities. GenMark and Luminex compete with privately held BioFire and Quidel Corp. (QDEL, Financial) in the multiplex testing market.
DiaSorin is one of the many health care companies that has benefited from the pandemic. Its molecular tests accounted for only 9% of sales in 2019. That figure jumped to 29% last year thanks to the company's Covid-19 test, which provided results in less than two hours. As a result, sales of the company's molecular tests increased 300% in 2020.
The pandemic also increased DiaSorin's sales in the U.S. and Canada from 29% to more than 40%, making North America almost as important a contributor as Europe and Africa, according to an article in MedTech Dive.
The addition of Luminex is aimed at sustaining the changes activated by Covid-19. Jefferies analysts said the takeover "catapults DiaSorin's presence in molecular diagnostics," a sector in which they said it currently lacks "critical mass," and boosts its U.S presence.
In March, DiaSorin shares were rated a hold by seven out of nine analysts, with only two giving the company a buy rating. At that timebefore the Luminex acquisitionanalysts assigned DiaSorin a high target of $96, a whopping $57 above its current price.
Disclosure: The author has no position in any of the companies mentioned in this article.
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