In a move to strengthen its sales abroad, ICN Biomedicals Inc., a Costa Mesa maker of biological laboratory products, agreed Friday to buy the biomedical business of Flow General Inc. of McLean, Va., for $41 million.
As part of the transaction, ICN Biomedicals will also assume $25 million in debt. Completion of the transaction, which is subject to the approval of federal regulators, is expected before the end of the year, the companies said.
The acquisition should sharply increase ICN Biomedicals' annual revenues, now about $50 million. Flow's biomedical unit has annual sales of about $100 million. The unit manufactures products for laboratories to do cell culturing and genetic engineering in researching and producing drugs. The subsidiary also makes products used to monitor and control contamination in clean rooms.
The deal will give Flow General an infusion of cash, which it says it needs to pay debts and to make its remaining research, analysis, electronics and software businesses profitable.
The biggest benefit for ICN Biomedicals will be the opportunity to greatly expand its sales and marketing abroad, especially in European Common Market countries, company officials said.
ICN spokesman Jack Sholl said 77% of Flow's laboratory sales are outside the United States, contrasted with 24% of ICN Biomedicals' sales. He said the Flow subsidiary has sales and support facilities in 12 places abroad, among them Italy, Britain, Germany, Japan, Holland, France and Australia.
Net Loss for Flow
However, ICN will be acquiring a subsidiary that is apparently not profitable. For the first nine months of fiscal 1989, the Flow biomedicals business posted a net loss of about $128,000 on revenues of $75.7 million, after taking into account credits of $5.3 million from the sale of some assets.
Flow has not yet reported the financial results for its subsidiaries for the full fiscal year, which ended June 30. But Walter Peterson, a securities analyst in the Baltimore office of Ferris, Baker Watts, estimates that the biomedicals subsidiary had an operating loss of $10 million for fiscal 1989. The net loss, after accounting for sales of assets, is estimated at less than $3.7 million.
Peterson said, however, that the Flow subsidiary's "foreign operations have been consistently profitable. So it does make sense if ICN is weak in the European arena to buy this company."
ICN Biomedicals, a majority subsidiary of ICN Pharmaceuticals, also said it expects that the merger will have a synergistic effect.
"Because of the complementary nature of the businesses in general, we will be able to take advantage of economies of scale and achieve greater operating efficiencies," Sholl said.