Varex Imaging Corporation (Nasdaq: VREX) announced today it has entered into an agreement to acquire at least 90% of the outstanding shares of common stock of Direct Conversion AB (publ). Stockholm-based Direct Conversion, also known by its Ajat and XCounter brands, is a leading manufacturer and marketer of linear array digital detectors utilizing direct conversion and photon counting technology.
The aggregate purchase price is €75 million for 100% of the outstanding shares, subject to customary adjustments, of which €10 million will be paid in either Varex common stock or cash on the first anniversary of closing. The company plans to fund the consideration using available cash and debt under its existing credit facility. The transaction is expected to be completed in the third quarter of the current fiscal year.
In 2018, Direct Conversion had revenues of €16 million with projected double-digit annual growth rates over the next five years. Direct Conversion also has more than €40 million in signed multi-year supply agreements with customers, primarily for its photon counting detector products. Varex expects the acquisition to be accretive to adjusted EPS in fiscal year 2020 and to generate a return on invested capital greater than its cost of capital within three years.
“Upon closing, this acquisition will expand our product portfolio to include new linear array digital detectors along with a revenue stream from these products for certain medical, dental and industrial applications. It is expected that the current applications will widen our addressable market for digital detector products by approximately $200 million over the coming years, with additional addressable market expansion potential of up to $500 million by replacing current CT detectors with photon counting technology in the future,” said Sunny Sanyal, Chief Executive Officer of Varex Imaging Corporation.
The X-ray imaging industry has been working on photon counting technologies because detectors built with this technology can significantly improve image quality while using lower dose and performing more precise material discrimination. Direct Conversion has successfully commercialized linear array digital detectors for certain medical and industrial applications and is expected to continue to work on applying this technology to additional applications, including medical CT detectors.
Spencer Gunn, Chief Executive Officer of Direct Conversion AB said, “We are excited to be joining Varex at this point in the growth and expansion of our digital detector array products. This transaction is expected to accelerate the adoption of this technology in the marketplace utilizing Varex’s position as one of the leading providers of digital detectors and its global distribution channels.”