Following two weeks of speculation and a bidding process involving at least four companies, on February 4, GE Healthcare announced that it would acquire Whatman for $713 million in cash (see page 2, IBO 1/15/08). The 268-year-old company with forecasted 2007 revenues of £116 million ($232 million), Whatman is a name long associated with laboratory filtration products, particularly filter paper and membranes. For GE Life Sciences, the acquisition is another major purchase in the area of life science research products. In 2006, GE Life Sciences acquired Biacore AB, the largest provider of surface plasmon resonance technology for proteomics research, for $390 million (see IBO 6/30/06). GE Life Sciences has annual revenues of $1.3 billion.

The Whatman acquisition adds filtration products to GE Life Sciences’ product portfolio of instruments and reagents for process chromatography, cellular analysis, protein research and genomics. Most importantly, according to Peter Ehrenheim, president and CEO of GE Healthcare Life Sciences, Whatman adds to GE Life Sciences’ products for sample preparation. As he told IBO, “Whatman’s product offering is very much complementary to our Life Sciences portfolio, so its expertise in filtration and its products are a great addition to our business, especially in the area of sample preparation.” Whatman’s sample preparation media, consumables and devices enable researchers to prepare samples for analysis using GE Life Sciences’ reagents and instruments. The companies also share a similar group of end-users: pharmaceutical and academic laboratories.

Asked about overlapping product lines, Mr. Ehrenheim said, “There is very little overlap in our respective product portfolios,” and noted, “We are particularly excited about the sample collection and storage opportunity with the FTA product line.” Whatman’s FTA cards are used to collect, purify and store DNA at room temperature in one step. On a conference call with financial analysts to discuss the acquisition, Mr. Ehrenheim noted FTA’s applicability to diagnostic workflows. “It will clearly help to contribute and drive some of our business with diagnostic companies.” In 2006, FTA revenues rose 60%, largely due to sales in the forensics market.

Another product highlight for Whatman in the last two years has been the Mini-uniprep syringeless filter. The Mini-uniprep is a storage and filtration consumable for removing particles from a sample prior to HPLC analysis. The autosampler-compatible vial has a built-in membrane which, when compressed, filters particulates and forms an airtight seal. In 2005 and 2006, sales of the product line increased 14% and 17%, respectively. Other Whatman product lines whose sales grew in 2006, excluding currency effects, were chromatography, which rose 14%, and neonatal testing paper, which was up 32%.

However, the results for other products have been mixed, in large part due to manufacturing and supply issues, exacerbated by the appointment of three CEOs over four years. The company’s integration of the German filtration firm Schleicher & Schuell, which it acquired in 2004 for $65.1 million (see IBO 11/15/04), resulted in the consolidation of manufacturing facilities, product lines and administrative functions. The disruption of operations and issues related to distribution, sourcing and management negatively impacted sales. In 2006, Whatman’s LabScience sales were flat at £69.4 million ($128.5 million), but rose 3% in constant currency. BioScience sales grew 19.8% to £31.5 million ($58.3 million) and, on a constant currency basis, rose 13%. For the same period, MedTech revenues fell 3.4% to £20.0 million, for a 2% increase without currency effects.

For the first half of 2007, Whatman sales declined 8% in constant currency (see IBO 10/15/07) to £53.7 million ($105.3 million) and operating profit plummeted 69.2% to £4.5 million ($8.8 million). In September 2007, Whatman announced a three-year restructuring plan to increase profits. The plan is focused on changes to manufacturing operations, inventory management and R&D (see IBO 9/30/07). As new CEO Kieran Murphy said at the time, “the processes for planning manufacturing and managing inventory has been a major weakness at Whatman.” GE Life Sciences plans to continue the restructuring plan. “We believe Whatman has a very strong strategic plan,” said Mr. Ehrenheim on the conference call. “And we will continue to execute basically that plan, and potentially accelerate that plan because we can put more resources behind it.” On the call, Mr. Ehrenheim and Mr. Murphy acknowledged that the plan will involve some job reductions. Whatman currently employs approximately 1,185 people.

GE’s expertise is well suited to assist in fixing Whatman’s manufacturing and supply issues. With such improvements, Whatman’s product lines can grow faster and further increase their profitability. In this way, GE Life Sciences is adding not only additional products for life science research workflows, but ones that are highly profitable. In addition, GE Life Sciences’ interest in the company’s newest products, such as FTA, indicates that further investments will be made in Whatman’s product lines and in R&D. GE Life Sciences’ marketing and distribution should also help drive adoption of these technologies. Although Whatman’s filtration products for food and environmental applications are not a direct fit with GE Life Sciences, they provide steady sales and can also be expected to benefit from the acquisition.