Accuray to buy TomoTherapy for $277M

by Brendon Nafziger, DOTmed News Associate Editor | March 07, 2011
Radiosurgery device maker Accuray Inc. said Monday it would buy radiation therapy company TomoTherapy Inc. in a mixed cash and stock deal valued at $277 million.

Sunnyvale, Calif.-based Accuray, which makes the CyberKnife radiosurgery platform, said it will buy out TomoTherapy for $4.80 per share, a 31 percent premium on TomoTherapy's Friday closing price. The deal is expected to close at the end of the second or beginning of the third quarter this year, pending regulatory and TomoTherapy shareholder approval.

The company said it hoped, in the words of a new promotional website, to become the "premier radiation oncology company."

"The transaction strengthens Accuray's position as the leading innovator in the field of radiation oncology and will enhance our growth strategy," said Accuray president and CEO Euan S. Thomson, in prepared remarks.

TomoTherapy shareholders will receive $3.15 in cash and 0.1648 shares of Accuray common stock per TomoTherapy share, Accuray said. Accuray's stock closed at $10.01 Friday.

The combined companies had $400 million in sales last year, with nearly a third of revenues coming from servicing the installed base of more than 550 units in 32 countries, Accuray said.

The CyberKnife was developed in 1987 at Stanford University; it received its first U.S. Food and Drug Administration clearance in 1999. TomoTherapy, which makes a computed tomography-guided intensity-modulated radiation therapy system, was founded in 1997.

Accuray didn't exactly specify what would become of TomoTherapy's Madison, Wisc. headquarters, but said it was "an important center for medical excellence and innovation" and that it's committed to maintaining a "strong presence in the area."

Stephen D. Simpson, an investor writing at the Seeking Alpha website who also owns some TomoTherapy stock, had mixed feelings on the acquisition, thinking it was undervalued.

"This deal may raise an eyebrow or two at [rivals] Varian and Elekta, but neither company is likely to sweat too much until the combined company shows that 'one plus one' equals something more than two," he wrote. "In the meantime, Accuray shareholders ought to be pleased that their company is adding excellent technology and broadening out its product suite at a very appealing price."

Accuray's stock fell 10.5 percent to reach $8.96 in recent trading.

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