PerkinElmer CEO Gregory Summe said this week that his company is on track to close its proposed acquisition of Packard BioScience in November. Speaking at the UBS Warburg Conference in New York this week, Somme said all that remains is a final formal approval by the Securities and Exchange Commission.
The Packard acquisition will help PerkinElmer increase its total revenue to $2.5 billion in 2004, Somme said. Current revenues are expected to total $1.5 billion this year.
PerkinElmer is paying up front for this anticipated long-term gain. SEC documents indicate that PerkinElmer will be incurring a $66.8 million charge in connection with the Packard acquistion.
Once the companies tie the knot, they have to resolve the important issue of how they will combine their sales, marketing, and management households.
Packard’s president, Franklin Whitney, has signed an undisclosed “employment agreement” with PerkinElmer, and other officers are to be paid severance benefits under preexisting agreements, according to SEC documents.
To retain other senior staff, Packard is planning to institute a retention bonus program, the SEC documents indicated.
In the merger, which has been proposed as a $650 million stock deal, each share of Packard stock will be exchanged for 0.311 shares of PerkinElmer stock, and Packard employees will retain their stock options. The value of the stock will remain largely unchanged — and could be slightly beneficial for Packard employees, as Packard’s stock has been trading in the $6 to $10 range and PerkinElmer’s stock has hovered between $24 and $33 over the past several months.
But many Packard employees may need to relocate in order to stay with the company. The future of Packard’s Meriden, Conn., headquarters is in question, as PerkinElmer is based in Boston. To further complicate matters, Packard’s Biochip Instruments division, formerly the life sciences department of GSI Lumonics, is still situated in Billerica, Mass., and it is not clear how the companies will combine these three locations.
Aditionally, the companies must decide what to do about competing distribution agreements. PerkinElmer’s Life Sciences division sells Genomic Solutions’ GeneTac biochip system, which competes with Packard’s arrayers and scanners and with the Cyclone Gene Array analysis system that Packard distributes for Research Genetics.
Outside of the microarray field, things get more complicated, as both companies manufacture liquid handling and microplate readers.
But Wayne Richardson, Packard’s director of investor relations, said this transition is likely to be smooth, due to PerkinElmer’s experience with mergers and its desire to expand its microarray business through the Packard acquisition.
“There are some sales overlaps, but it is not likely we will lose many people,” Richardson said.
PerkinElmer has completed 29 acquisitions and divestitures since 1997, according to Somme. The company is expected to release third-quarter earnings on October 17.