Mesa Labs Acquires SGM Biotech - Pharmaceutical Technology
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Mesa Labs Acquires SGM Biotech

In April this year Mesa Laboratories, a Lakewood, Colorado-based manufacturer of electronic instruments and disposables, acquired SGM Biotech, a Montana manufacturer of biological indicator (BI) products.

Under the terms of the transaction, Mesa Labs has acquired all of the outstanding shares of SGM for approximately $12 million in cash, subject to certain net asset adjustments. In the 12-month period ended 31 March 2010, SGM had unaudited revenues of approximately $6.3 million. In conjunction with this acquisition, Mesa will also be purchasing the building in Bozeman, Montana, currently occupied by SGM.

The addition of SGM is expected to increase Mesa’s cash flow significantly. Excluding deal-related costs and amortization expenses, the acquisition is expected to be accretive to earnings for the fiscal year ending 31 March 2011, while including these expenses, the acquisition is expected to have a negligible affect on earnings per share for this period. By realizing manufacturing synergies between SGM and Mesa’s existing BI division, the acquisition is expected to be accretive on both a cash and GAAP basis in subsequent fiscal years.

The acquisition of SGM by Mesa Labs expands and complements Mesa’s existing offering of biological indicators through its Raven Labs division. SGM and Raven are both well-established brands in the BI marketplace, with loyal customer followings. The operational plan going forward will be to maintain both the SGM and Raven brands in the market, operating somewhat independently. Customers have established their testing protocols around a particular brand and, by maintaining differentiated positions of the two BI brands, it will minimize the impact this acquisition will have on end users. SGM’s BI manufacturing facility will be maintained in Bozeman, Montana, as will Raven’s in Omaha, Nebraska.

“We are delighted to welcome SGM Biotech into the Mesa organization,” said John J Sullivan, president and CEO of Mesa Labs. “SGM has earned an enviable reputation in the BI market as an innovator and manufacturer of high-quality products. By fostering collaboration between our two BI divisions, Raven and SGM, we expect to offer ever-expanding product lines to meet emerging sterilization trends in both industry and healthcare. By maintaining two distinct divisions, we will be able to offer redundancy in supply that cannot be offered by any other BI manufacturer. Redundant supply is a critical factor for many of our customers who use our BIs as an integral part of their sterile manufacturing process. I look forward to working closely with the SGM team in the months ahead as they integrate into the Mesa organization.”

“We are pleased to join Mesa Labs, well-respected for its product quality and customer service,” commented SGM’s two shareholders, John R Gillis and Darlene Hartze. “We believe this will create access to new markets and distribution channels that will enhance overall corporate objectives. We are also excited for these expanded horizons that will provide our employees greater opportunities.”

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