GE to acquire Vital Signs for $860 million cash

By Scott Malone

BOSTON (Reuters) - General Electric Co (GE.N) said on Thursday it would acquire medical-device maker Vital Signs Inc VITL.O for $860 million, a move to expand its $17 billion health care operation into the single-use products market.

By buying Vital Signs, GE, which makes high-tech medical equipment such as machines that administer anesthesia, gets access to an additional revenue stream -- consumable supplies that must be replaced with each patient.

"Equipment is like an automobile and the single-use product is sort of like the gasoline," explained Terry Wall, chief executive of Totowa, New Jersey-based Vital Signs.

"For every operation you obviously need an anesthesia machine," said Wall, "but your machine is going to last you five to 10 years where every single operation you need a new single-use anesthesia circuit."

Vital Signs shares surged on the news of the $74.50 per share cash offer, a 28.4 percent premium to Vital Signs' $58 close on the Nasdaq on Wednesday. The offer is above the shares' 52-week high of $61.20 reached on May 9.

Omar Ishrak, president and CEO of GE Health Care's clinical systems unit, said that the deal, due to close in the fourth quarter, would be a boost to earnings next year at the second-largest U.S. company by market capitalization.

"We expect this business to grow at double-digit rates," Ishrak said. Vital Signs last year earned $19.2 million on $205.3 million in net revenue, which takes into account the effect of rebates on the company's products.

GE said the deal values Vital Signs at $860 million net of cash and investments. It said that shareholders with a 37 percent stake in Vital Signs have agreed to vote in favor of the deal.

Vital Signs shares were up $14.90 to $72.90 on the Nasdaq.

(Editing by Brian Moss and Steve Orlofsky)