Accuray agrees to buy TomoTherapy for $277M


Associated Press

Posted on March 7, 2011 at 1:01 PM

Updated Monday, Mar 7 at 4:00 PM

NEW YORK (AP) — Accuray Inc. said Monday it will buy TomoTherapy Inc. for $277 million in a deal that unites two companies that make radiation therapy systems.

Accuray will acquire TomoTherapy for $4.80 per share in cash and stock, which is a 30.8 percent premium to the most recent closing price of TomoTherapy shares. The boards of both companies have approved the deal, and assuming TomoTherapy's shareholders and antitrust regulators approve, the sale is expected to close in the second quarter or early third quarter.

TomoTherapy's Hi-Art system is designed to spiral around a patient to deliver more direct doses of radiation to a tumor and avoid healthy tissue. It uses thousands of small radiation beams to target the tumor more precisely instead of using larger beams, and daily CT scans help physicians to get up-to-date information on the patient's anatomy.

Accuray, of Sunnyvale, Calif., makes the CyberKnife Robotic Radiosurgery System. Accuray says CyberKnife is the world's only robotic radiosurgery system designed to treat tumors anywhere in the body without surgery and it also automatically compensates for patient movement.

Both systems are approved to treat a variety of tumors, including cancers of the brain, lung, and prostate. Accuray President and CEO Euan Thomson said during a conference call the two companies serve the same patients. CFO Derek Bertocci said the deal will double the size of Accuray's sales force.

The combined company will have 1,100 employees overall and about 550 systems installed in 32 countries. TomoTherapy reported revenue of $195.4 million in 2010 and it expects that to grow to $215 million to $235 million this year. Accuray has reported $206 million in revenue over its last four fiscal quarters.

While Accuray has been profitable in three of its last four quarters, TomoTherapy expects to lose 30 to 50 cents per share in 2011. Accuray expects the deal to add to its profit starting in the fiscal year beginning July 1, 2012.

Jefferies analyst Joshua Jennings said the acquisition would create new opportunities for Accuray and bring it into new markets. However he said some analysts are concerned about TomoTherapy's service costs and potential competition.

Accuray said it is committed to maintaining a presence in Madison, Wis., where TomoTherapy is based, although it did not provide further specifics.

TomoTherapy stock has traded between $2.59 and $4.18 in the last year. Under the terms of the deal, TomoTherapy shareholders will receive $3.15 in cash and 0.1648 shares of Accuray in exchange for each TomoTherapy share held.

Shares of TomoTherapy climbed 90 cents, or 24.5 percent, to $4.57 in afternoon trading. Earlier the stock reached a two-year high of $4.70. Accuray shares fell $1.05, or 10.5 percent, to $8.96.