Diasonics MRI Unit to Be Sold to Tustin’s Toshiba America

Toshiba America Medical Systems Inc. in Tustin has agreed to buy the MRI Division of Diasonics Inc. in a deal valued at about $187 million. The acquisition instantly turns Toshiba into a major player in the growing U.S. market of magnetic-resonance imaging systems.

The purchase will boost Toshiba America’s annual sales to about $350 million from $200 million, while expanding its work force of 650 employees to 1,200.

Terms of the sale, which is expected to close in late September or early October, call for Toshiba, a manufacturer of diagnostic imaging systems, to pay San Francisco-based Diasonics $167.5 million in cash and assume about $20 million in debt.

By acquiring the MRI Division of Diasonics, Toshiba America will become the nation’s third-largest manufacturer of magnetic resonance-imaging systems, according to Paul Brown, medical analyst with Volpe & Covington. MRI systems are expensive, high-tech devices that make images of the body that are much clearer and more exact than X-rays.

Diasonics said it will reinvest much of the sale proceeds in developing its remaining ultrasound, high-performance X-ray and lithotrity businesses, which previously accounted for 60% of its revenue. Lithotrity is the process of crushing a stony mass in the bladder so it can be eliminated in urination.

Diasonics’ stock Tuesday was the most actively traded on the American Stock Exchange. On a trade volume of 3 million shares, its stock price rose about 11%, to close at $4.12.

Increasing Competition

Allan May, Diasonics’ vice president and corporate counsel, said the sale was fortuitious because Diasonics expected to encounter increasing difficulty in competing with much larger and more capital-rich companies in the magnetic-resonance imaging field, such as Philips Medical Systems, Siemens AG and GE Medical Systems.

Toshiba America Medical Systems, as part of the $30-billion Toshiba conglomerate with headquarters in Tokyo, has the deep pockets to compete with the giants.

The Diasonics acquisition will give a big boost to Toshiba America’s domestic business. Long a world leader in the production of imaging equipment used in hospitals to diagnose disease, Toshiba has struggled for 12 years to gain a significant U.S. presence.

Toshiba has installed just eight MRI systems in the United States, while Diasonics has installed 250 MRI systems nationally.

Analyst Brown said that after the purchase of the Diasonics division, Toshiba America will have a 15% market share for magnetic-resonance imaging systems in the United States. That will make it third-largest, Brown said, trailing only GE’s 35% and Siemens’ 20%.

Ronald B. Schilling, vice president and general manager of Toshiba America Medical Systems, said Diasonics was attractive to Toshiba because it provides a good business blend. He said Diasonics is the U.S. market leader in the sale of mid-level MRI systems, which is similar to Toshiba’s position in Japan.

In addition, he said, Toshiba has developed higher-end systems, while Diasonics has lower-cost systems to complete the product spectrum.

Schilling has intimate knowledge of the Diasonics MRI Division. Before joining Toshiba, he helped Diasonics to establish the MRI Division in 1983 and was its president until 1986.