) completed the divestment of its LIFECODES business unit to
Immucor Inc., a prominent player in the automated
instrument-reagent systems space in the blood transfusion
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HOLOGIC INC (HOLX): Free Stock Analysis
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Earlier, on Jan 3, Hologic had announced its definitive agreement
to sell its LIFECODES business in order to focus on its core
business activities. As expected, Hologic successfully completed
the divestiture in the second quarter of fiscal 2013.
Per the agreement, Hologic received cash payment of $85 million
(adjusted for working capital items). The company might also
receive a contingent payment of $10 million from Immucor
depending on the fulfillment of certain financial goals for the
LIFECODES became a part of Hologic's broad based business after
the Gen-Probe acquisition in Aug 2012. The business unit
comprises the transplant diagnostic division under the company's
mainstay Diagnostic segment.
The divestment of LIFECODES will enable Hologic to sharpen its
focus on other operating platforms under its Diagnostic segment,
which are more in tune with its current growth strategy. The sale
will allow it to direct resources towards core operations in
order to leverage top-line.
In fiscal 2012, Hologic's long-term debt (net of current portion)
increased more than two fold to almost $5 billion. With a
debt-to-capital ratio of approximately 63% in fiscal 2012, the
balance sheet appears to be highly leveraged.
Although the divestment will garner incremental funds for the
company and reduce its debt, we are wary about Hologic's ability
to improve its debt position immediately on the heels of the
Offering a wide range of products, Hologic is an industry leader
in the field of women's health. While the company continues to
deliver robust top-line growth, its bottom-line remains under
continuous pressure due to higher interest expense from a huge
debt burden due to the Gen-Probe acquisition and pipeline
The stock carries a Zacks Rank #3 (Hold). Although we remain on
the sidelines for Hologic, we believe that other medical stocks
) are likely to do well. These stocks carry a Zacks Rank #2 (Buy)