A `Double Play' On Diasonics

This may be one of those "where else, but on Wall Street" stories. Buy one stock and end up owning three stocks with a combined value more than twice the original stock. The company is Diasonics, a maker of X-ray machines and ultrasound systems.

Diasonics shares have been in a downswing all year, due, in part, to spreading worry over rising medical costs. Trading at 16 in mid-February, the stock has dropped to 10. Aware that Diasonics' assets are worth much more than 10, management decided to split Diasonics into three public entities to better define their market values.

The proposed split, expected to be done by early September, has "real shareholder-enhancement benefits," which make the three companies worth a combined $25 in about a year," figures Tom Fendrich, who heads Fendrich Associates Institutional Research. He sees the stock rising possibly to 18 over the near term.

The company's three major operations are the OEC Medical Systems-Specialty X-ray unit, Diasonics' strongest business, consisting of mobile X-ray and fixed-room imaging systems; Diasonics Ultrasound, which hopes to rebuild leadership status by introducing the Spectra VST product line that helps physicians make more accurate diagnoses; and FOCAL Surgery, whose first product, Sonablate, is almost ready for market. This equipment produces high-intensity ultrasound waves shown to be effective in treating enlarged prostate glands without surgery.

Fendrich puts a value of $15 a share on the OEC unit and $5 for Ultrasound. FOCAL Surgery, says Fendrich, is worth another $5. At least one money manager agrees with Fendrich. He has accumulated about 5% of the stock.

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