NeoGenomics picks up GE-subsidiary Clarient for up to $275m

NeoGenomics said last week it finalized an agreement to acquire GE Healthcare‘s (NYSE:GE) cancer diagnostic subsidiary Clarient for up to $275 million.

GE Healthcare originally purchased Clarient for nearly double that price at approximately $587 million in 2011.

NeoGenomics said the acquisition would allow it to broaden its cancer diagnostic testing offerings to both hospitals and physicians and clinical trials and research.

NeoGenomics said it will provide $80 million in cash, $110 million in preferred stock and 15 million shares of common stock for the acquisition.

After 3 years the preferred stock will be convertible to common stock at $7.50 a share, if the average common stock price is above $8, the company said. NeoGenomics shares are trading at $6.82 as of 2:31 p.m. EDT.

“Our vision is to become America’s premier cancer testing laboratory, and this acquisition is a major step forward in achieving that vision.  We have always respected Clarient’s outstanding capabilities, and are very pleased to be able to combine them with our own outstanding service offering.  Hospital, physician, and pathology clients will benefit from our ability to offer the “best of the best” products and services available from each company.  We are particularly pleased to add Clarient’s sizable and fast-growing clinical trial support business to further strengthen our own initiatives in this area.,” NeoGenomics CEO Douglas VanOort said in prepared remarks.

Aliso Viejo, Calif. and Houston, Texas-based Clarient pulled in $127 million in revenue in 2014 and currently has 415 employees, NeoGenomics said.

The deal is slated to close in the 4th quarter of this year, the company said. As part of the deal, NeoGenomics will expand its board of directors to include the appointment of a new director from GE Healthcare, which will now beneficially own approximately 32% of NeoGenomics.

“We’re proud of the highly talented and dedicated people at Clarient, who deliver an outstanding level of service to physicians and to leading players in the pharmaceutical industry, helping guide patient treatment and supporting the discovery and development of new medicines.  We believe the business will benefit from the focus that will come from being part of NeoGenomics, while allowing GE Healthcare Life Sciences to focus on its core long-term growth areas in bioprocessing, cell therapy and disease imaging,” Clarient Diagnostic Services CEO Cindy Collins said in a press release.

GE Healthcare closed its purchase of Clarient back in 2011 through a short-form merger in a $5-per-share cash deal worth about $587 million. GE’s buyout of the cancer diagnostic company was part of its strategy to grow is disease-diagnosis business, the company said.

GE Healthcare initially proposed the acquisition of Clarient in October, and the deal survived the lawsuit from group of investors who accused Clarient of agreeing to terms that prevented it from shopping around for a better deal.

The deal came under the scrutiny of the Securities and Exchange Commission in September, when the SEC charged a trio of individuals with insider training related to GE Healthcare‘s (NYSE:GE) purchase of cancer diagnostic company Clarient.

The individuals include a father, son and personal friend accused of abusing confidential information the father learned from a close friend working at 1 of the companies, according to the SEC.

The father, John McEnery III tipped off his son, John McEnery IV, and personal friend Michael Rawister of the acquisition, according to the SEC. The trio profited by more than $50,000 after Clarient stock price rose 33% on public announcement of the acquisition.

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