SonoSite Inc. (SONO), a U.S. bedside ultrasound and cardiograph equipment maker, is up for sale and in talks with potential buyers including Samsung Electronics Co., said three people with knowledge of the matter. The stock jumped the most in 13 years.
SonoSite, with a market value of $427 million as of yesterday, hired JPMorgan Chase & Co. (JPM) to advise it on a possible sale, said the people, who declined to be identified because the talks are private. SonoSite, based in Bothell, Washington, is asking for second-round bids and aims to reach a sale agreement by mid-December, one of the people said.
SonoSite is attracting interest from bidders looking to expand in medical equipment, an area that may grow as the proportion of elderly residents in markets from the U.S. to Europe and Japan climbs and health-care providers seek to reduce costs through better diagnostic technology. The number of people 65 and older will account for 8.3 percent of the world’s population by 2014, compared with 7.9 percent this year, according to U.S. Census Bureau data compiled by Bloomberg.
The company’s shares increased 30 percent to $39.95 at the close in New York, the biggest single-day gain since April 1998.
SonoSite introduced an improved hand-carried ultrasound system and a new cardiograph tool this year. The company’s research and development costs rose 27 percent from a year earlier to $10.7 million in the third quarter, according to an Oct. 25 statement. Net income fell 24 percent to $720,000.
Marcus Smith, SonoSite’s chief financial officer, didn’t return a call requesting comment. Tasha Pelio, a JPMorgan spokeswoman, declined to comment.
SonoSite would be an attractive target for companies seeking to offer diagnostic tools that help customers reduce health-care costs, said Alan Robinson, an analyst at RBC Wealth Management in Seattle.
“It doesn’t surprise me that SonoSite management is making overtures to larger acquirers at this stage,” in part because the company will lose patent protection on its hand-carried ultrasound devices in 2016, he said.
“As their patent portfolio starts to come up to expiry, I think management will be increasingly focused on maximizing their technological lead, and to do this, I think they’ll need a deeper-pocketed partner,” Robinson said in an interview.
“Samsung continuously reviews various business opportunities,” Jason Kim, a Seoul-based spokesman for the company, said by telephone. “However, we don’t comment on speculation or rumors about our business.”
Samsung Chairman Lee Kun Hee plans to build the company’s medical-equipment business into one that generates 10 trillion won ($8.8 billion) in annual sales by 2020 as overall revenue growth slows. The company, which doesn’t break out medical- equipment revenue, is in talks to buy makers of MRI scanners and X-ray machines to challenge General Electric Co. (GE) and Siemens AG (SIE) in medical equipment, Senior Vice President Jo Jae Moon said in an interview in July.
The Suwon-based company is making a push into an industry led by General Electric, which had $16.9 billion of revenue from health care last year, according to data compiled by Bloomberg. Siemens had 12.3 billion euros ($17 billion) in revenue from medical solutions in 2010, a 3.4 percent increase.
Johnson & Johnson (JNJ), the world’s second-biggest seller of health products, agreed in April to buy Synthes Inc. (SYST), a maker of medical tools to treat damaged bones, for $21.3 billion. The deal would make New Brunswick, New Jersey-based J&J the leader in the $5.5 billion market for devices that treat trauma victims.