NEW YORK (GenomeWeb) – Hologic announced after the close of the market on Wednesday that it will sell its share of a blood screening business to Grifols, its commercial partner, in a deal worth $1.85 billion in cash.
The boards of directors of both companies have approved the deal.
"We believe we are seeing excellent value for a non-core business that was a drag on our growth and that operates in a challenging market with ongoing headwinds," Hologic Chairman, President, and CEO Steve MacMillan said in a conference call today while discussing the divestiture. "Grifols will get full ownership of a market-leading business that is most competitive under a single owner, while we significantly strengthen our balance sheet and financial flexibility."
Since 1998, Hologic and Grifols have collaborated in molecular blood screening through their respective predecessor companies. Hologic has been responsible for R&D of Procleix blood screening products, and Grifols has been responsible for global commercialization.
Blood banks use Hologic's automated Tigris and Panther systems to run molecular assays and screen donated blood for viruses including HIV, hepatitis C and B, West Nile, and Zika.
The companies have been sharing revenue from the products, but under the current agreement, Grifols will receive a license to certain parts of Hologic's intellectual property for use in blood screening.
Around 175 people who work primarily in operations and R&D will transfer to Grifols, and Hologic will hand over ownership of its blood screening manufacturing facility in Rancho Bernardo, California.Â
However, Hologic will retain the engineering expertise that led to the development of its automated Tigris and Panther systems, and it will continue to engage with Grifols as a partner, to ensure that blood screening customers continue to benefit from the instrumentation over the long term, Hologic said.
In fiscal 2017, Hologic's share of the blood screening business was forecast to contribute around $240 million of revenue, GAAP diluted EPS of $0.19, and non-GAAP diluted EPS of $0.34. The firm said that it will update its financial guidance for fiscal 2017 after the transaction closes, which is likely to occur in the first quarter of 2017.
"The business is not strategic for us, as we lack the ability to control our commercial destiny," MacMillan said during the conference call. "Moreover, since our partner manages sales and marketing, commercial synergies with our other product franchises and channels do not exist."
He noted that this deal is so compelling, "we're taking it now and think it is absolutely the right thing to do."
MacMillan said that proceeds from the divestiture would be used primarily "to fund prudent bolt-on acquisitions over time."
Evercore ISI analyst Vijay Kumar noted that the ultimate price paid "is quite attractive at nearly seven-times revenues."Â