Axon accepts takeover bid

Microarray and cellular screening company Axon Instruments (ASX:AXN) has accepted a friendly takeover offer from California-based Molecular Diagnostics.

The offer is for US$140 million (AUD$186 million) in cash and shares, valuing Axon at approximately 36 cents a share -- a 37 per cent premium on its 26.5 cent share price.

Axon spokesman David Kenley said today that the company's board had considered a number of suitors, but Molecular Devices was the best strategic fit for a number of reasons.

"Axon had to look for substantial growth," he said. "The synergies are excellent from Axon's point of view, both in the marketing and distribution Molecular Devices can offer and the added financial strength. There are some also synergies and therefore savings in terms of expense line."

Axon -- which listed on the ASX in 2000, and turned 20 just a few months ago -- is based in Melbourne, although most research and manufacturing takes place in Union City, in California's Silicon Valley. Shortly after listing, Axon's shares soared to AUD$2.29, but for the last two years they have traded below 40 cents.

Mixed fortunes have also dogged Axon's recent profit results. In 2002 the company reported an after-tax loss of US$9.5 million. But more recently, austerity measures bore fruit and last week Axon trumpeted return to profit of US$1.1 million. Lower research expenses and higher profit margins both contributed to the result.

The success of Axon's new PatchXpress high-throughput screening instrument -- which retails for around US$400,000 -- both boosted revenues, and also "raised a few eyebrows" in the instruments community, said Kenley.

PatchXpress is an automated 'patch clamp' instrument for ion channel drug screening. It can screen thousands of compounds each day by measuring tiny electrical currents produced when a drug triggers activity in a cell's ion channels. Regulating ion channels is important in treating pain, stroke, epilepsy, diabetes and high blood pressure.

According to Kenley, Molecular Devices followed up Axon's announcement in February that PatchXpress had clocked up 20 sales. Molecular Devices has a competing product in high-throughput screening, the IonWorks HT electrophysiology system, and was keen to get access to Axon's superior product, he said.

In a statement, Molecular Devices' president and CEO Joseph Keegan said the Axon acquisition was "an exciting opportunity... to broaden our footprint in our core drug discovery and life sciences markets and further strengthen our technology base.

"Both Molecular Devices and Axon possess world-class engineering and longstanding track records for delivering innovative products."

Completion of the transaction is subject to approval from both Axon and Molecular Devices shareholders, as well as a number of US conditions, including antitrust clearance and Securities and Exchange Commission registration. Axon shareholders will have the opportunity to approve the takeover in the second quarter of 2004.

According to Axon, the company will retain its Melbourne presence "for the time being". CEO Alan Finkel will become Molecular Devices' vice-president and chief technology officer.