Shares of Beckman Coulter Inc., a maker of hospital laboratory equipment, fell a day after it announced it would buy medical diagnostic company Biosite Inc. for about $1.55 billion (EUR1.17 billion).
Fullerton-based Beckman offered to buy all of San Diego-based Biosite's outstanding common stock for $85 per share, which represented a 53-percent premium over the stock's closing price Friday. Beckman announced the deal late Sunday night.
"That seems a bit rich," said Merrill Lynch analyst Lee Brown, echoing sentiments of other Wall Street analysts who questioned executives during a Monday conference call.
Biosite's stock soared $28.42, or 51 percent, to $83.80 at the close of trading on the Nasdaq Stock Market. Beckman stock fell $4.57 a share, or 7 percent, to $62.51 at the close of trading on the New York Stock Exchange.
Piper Jaffray analyst William Quirk downgraded Beckman stock after the purchase. In a client note, he said the price is high, and revenue from Biosite's biggest earner, a heart failure test, is expected to grow at levels below its competitors.
Beckman officials said the company would borrow most of the money needed to complete the acquisition and the new debt could hurt its credit rating.
Fitch Ratings said it would need more information about the acquisition, but that a "multiple-notch downgrade" is probable.
"The rating action reflects the material increase in leverage that will be required to finance the transaction," Fitch said in a statement.
Beckman Chief Executive Scott Garrett said the company made the lucrative offer because other companies were also bidding on Biosite. Garrett said that the acquisition will pay for itself after duplicative expenses are eliminated by the two companies combining, and assuming a "modest uptick" in Biosite's revenues.
The companies have been working together for the past four years developing tests that help diagnose and assess certain heart illnesses, reports AP.
Biosite reported revenue of slightly more than $300 million (EUR226.16 million) for 2006. Beckman had $2.5 billion (EUR1.88 billion) in revenue last year.
Pending regulatory approval, the transaction is expected to close in the second quarter of 2007.
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