Teledyne Technologies (TDY) has agreed to acquire X-ray imaging components manufacturer Varex Imaging (VREX) in a $1.1 billion deal that will expand its X-ray device portfolio to include oncology detectors.
Teledyne will pay $18.90 in cash for each Varex share, the companies said in a joint statement on Monday. The $1.1 billion valuation includes Varex's equity awards and net debt.
Shares of Varex surged 48% in Monday trading, while Teledyne edged up 0.3%.
Varex develops X-ray sources and digital X-ray detectors and provides interconnects and imaging software to global original equipment manufacturers. Teledyne provides imaging products, along with electronics and engineered systems.
Both companies' products are "uniquely complementary with minimal overlap," even though they serve similar customers, Teledyne Executive Chairman Robert Mehrabian said in the statement.
"While Teledyne produces X-ray detectors, we do not provide detectors suited for high-radiation environments such as oncology, as does Varex," Mehrabian said. "In addition, only Varex provides new advanced photon counting detectors for healthcare and industrial inspection."
Varex also produces X-ray tubes for radiography, fluoroscopy or computed tomography applications, Mehrabian said.
The transaction, which requires approval from regulators and Varex's shareholders, is expected to complete early next year, the companies said.
"Our X-ray technologies fit naturally alongside Teledyne's product portfolio, and its resources will help us accelerate adoption of our advanced imaging solutions, and development of the next generation of products," according to Varex Chief Executive Sunny Sanyal.
The deal reinforces that technically differentiated X-ray businesses command "strategic premiums from larger diversified industrial/aerospace acquirers," Wedbush Securities said in a note.
In a separate statement, Varex reported fiscal third-quarter adjusted earnings of $0.31 per share, up from $0.13 the year before. Four analysts surveyed by FactSet expected $0.21. Revenue grew to $210.5 million from $203 million, compared with the consensus of $215.5 million based on projections from five analysts.
Last month, Teledyne said its adjusted EPS rose to $6.28 in its fiscal second quarter from $5.20 in the prior-year period. Sales added 9.8% to $1.66 billion. At the time, the company said it expected adjusted EPS of $24.45 to $24.65, while the Street is currently looking for $24.67.
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