Feb. 28 (Bloomberg) -- EQT AB, the buyout firm partly owned by the Swedish billionaire Wallenberg family, agreed to buy Dako Denmark A/S for 7.25 billion Danish kroner ($1.3 billion) to gain medical tests used to diagnose cancer.

The EQT V fund will purchase Glostrup, Denmark-based Dako from the family of the founder, which owns 61 percent, Danish drugmaker Novo Nordisk A/S, which holds 27 percent, and a group of smaller shareholders. Dako makes chemicals, instruments and software used by labs and hospitals to diagnose the disease.

Takeovers of medical-product companies have surged 126 percent worldwide to $134.7 billion in the past 24 months, surpassing the market growth for buyouts in pharmaceuticals, data compiled by Bloomberg show. EQT has stakes in dialysis equipment maker Gambro AB, lab test supplier HemoCue AB and hospital operator Aleris AB. Dako controls more than 35 percent of the global market for specific tissue-based cancer tests.

``We could see that the area of cancer diagnostics was due for a consolidation,'' Jesper Brandgaard, chief financial officer at Novo Nordisk, said today in a telephone interview.

Dako, which was founded by Niels Harboe in 1966, has about 1,300 employees and sales of about 1.7 billion Danish kroner. The company has operations in more than 20 countries, and its products are distributed by other companies in another 50. Cancer is the second-leading cause of death in the U.S., killing more than 550,000 people each year.

By comparison, takeovers involving drugmakers increased 13 percent to $282.4 billion in the last two years. Buyouts of makers of medical testing and devices had been rare because many of the companies are highly valued, JPMorgan Securities analysts said yesterday in a note to investors. The companies also often depend on government funding, making their cash flow volatile, they said.

Buyout Firms

EQT is paying about 4.3 times Dako's sales. That compares with about 2.8 times revenue that Siemens AG paid for Bayer AG's diagnostic division last year, and 3 times sales that General Electric Co. is paying for Abbott Laboratories' diagnostic- equipment unit.

Dako ``fits very well with EQT's strategy to invest in high- quality companies with substantial growth and development potential,'' said Ole Andersen, senior partner of EQT Partners, in a statement on its Website. The management of EQT last week agreed to pay 290 million Swedish kronor ($41 million) for 36 percent of the Wallenberg's stake, reducing the family's holding in the buyout firm to 31 percent.

Buyout firms use a combination of their own funds and debt to pay for takeovers. They then typically seek to expand those companies or improve performance before selling them within five years to other funds or to investors through stock offerings.

The deal is subject to regulatory and Dako shareholder approval.

Industry Consolidation

Investor interest in medical device companies has grown as pharmaceutical companies face thinning pipelines and generic competition. Last month, Investor AB, the Wallenberg's holding company, agreed to buy wound care treatment maker Moelnlycke Health Care AB for 2.85 billion euros, beating two rival offers from private equity firms.

GE is buying the Abbott division for $8.13 billion to get machines that test blood proteins for conditions including HIV and heart disease. Siemens last year agreed to pay 4.2 billion euros for Bayer's unit that makes machines that analyze the blood or urine of patients.

Stockholm-based Investor AB teamed up with Morgan Stanley's Principal Investments unit to purchase the maker of surgical gloves from buyout firm Apax Partners Worldwide LLP. Apax, based in London, also got bids from Blackstone Group LP and Clayton, Dubilier & Rice Inc.

Goldman Sachs Group Inc. advised EQT and Lehman Brothers Holdings Inc. advised Dako. Accura was EQT's legal adviser and Bech Bruun advised Dako.

Novo Investment

Bagsvaerd, Denmark-based Novo's stake is worth 1.5 billion kroner. The company may use the money to speed up its 10 billion kroner share buyback program, he said.

Novo Nordisk will update its full-year guidance, including the effect of currency development, when first-quarter results are released May 2.

Novo Nordisk has been a shareholder in Dako since 1992. Because of consolidation in the cancer diagnostics industry, shareholders agreed ``a new ownership structure would be in the best long-term interest of Dako,'' Novo Nordisk said.

Shares in Novo Nordisk rose 5 kroner, or 1 percent, to 485 kroner at the close of trading in Copenhagen.

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzkop@bloomberg.net

Last Updated: February 28, 2007 12:18 EST