The Rise and Fall of Gyrus
The Pounds 935m takeover of the British medical technology developer by the Japanese giant Olympus has shone the spotlight on an under-valued sector. By Nic Fildes
On a day when constituents of the FTSE 350 almost universally headed into negative territory, one stock stood out a mile after adding more than 50 per cent in value. The company in question was Gyrus, a medical technology developer, which has agreed to a near- 1bn takeover by the Japanese camera giant Olympus, a surprise deal that slightly tempered the doom and gloom yesterday.
Olympus is one of the world's most high-profile camera manufacturers, famous for the "Who do you think you are - David Bailey?" advertising campaign that ran during the 1970s and 1980s and was recently resurrected to promote its digital range.
However, the Japanese company makes most of its money producing medical instruments such as endoscopes, and with intense competition in the digital camera market suppressing margins, Olympus has snapped up Gyrus to bolster its position in the high-growth surgical market. The cash deal, which has been recommended by the Gyrus management team, is the largest acquisition the Japanese electronics company has ever made.
Analysts were not surprised that Gyrus, a mid-cap medical technology company which has built a leading position in a number of surgical end-markets such as urology and gynaecology, had attracted a bid. Yet the identity of the bidder was a shock, as it had been assumed that the Reading-based company would end up in the hands of one of the US medical device giants, such as Johnson & Johnson or Stryker.
The size of the premium that Olympus has paid for Gyrus also raised eyebrows. At 630p a share, the offer is pitched at a 58 per cent premium to the UK company's closing price on Friday, and 22 per cent higher than the stock's all-time high.
The offer, which values Gyrus at 935m, could be high enough to ward off interest from other bidders, although Paul Cuddon, an analyst at KBC Peel Hunt, said that Johnson & Johnson is unlikely to be comfortable with Olympus entering the market for general electrosurgical devices and may consider a counter-bid. Companies such as Stryker, ValleyLab and Pentax were also seen as possible suitors to rival the Japanese company's ambition. Mr Cudden said that some interested parties may have been surprised by the speed at which Olympus has done the deal, and that until the takeover completes, there is room for further share price upside.
Any rival bid is likely could be complicated by the US regulators, due to the overlap in the major players' operations. The Nomura analyst Michael King said that the likes of Karl Storz, a leading supplier to the urology and gynaecology markets, may be interested in Gyrus, but the overlap may be too great for US regulators. For Olympus, the overlap between the two businesses is not as stark, with the Japanese company strongest in Japan and Europe, while Gyrus has a more dominant position in the US.
The merger of Olympus, a leader in visualisation technology, with the UK company will create a global leader in the "see and treat" market - where one company provides both the imaging and the treatment devices to surgeons - according to Brian Steer, long- serving chairmanof Gyrus.
Olympus said that the combined company will have revenue of around 1.5bn, with Gyrus operating as a standalone …
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Publication information: Article title: The Rise and Fall of Gyrus. Contributors: Not available. Newspaper title: The Independent (London, England). Publication date: November 2, 2007. Page number: 40. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.