Varian Medical Systems Announces Plan To Spin Off Imaging Components Business

  • Imaging Components business will become a new independent publicly traded company, which will be spun off by means of a tax-free distribution to Varian stockholders
  • Spin-off enables Varian to focus on expanding its position as a global medical company with leading technology for cancer treatments
  • Empowers new company to grow beyond medical industry as a global leader in components, software and services for expanded imaging applications and markets
  • Spin-off anticipated to be completed by end of calendar year 2016
Varian Medical Systems announced that it plans to spin off its Imaging Components business as a new, stand-alone public company via a tax-free distribution to Varian stockholders in a transaction anticipated to be completed by the end of calendar year 2016. 
"The spin-off will create two strong, independent companies," said Dow Wilson, CEO of Varian Medical Systems.  "It will enable Varian to focus on expanding its position as a global cancer company with leading technology and services.  It will empower the new company to grow as a global leader in components, software and services for expanded imaging applications and markets."
"By executing this transaction, we will give two fundamentally different businesses independence to optimize their strategies and operations to enhance their growth," Wilson added.  "The objectives and growth strategies of our imaging components and oncology businesses are now taking them in different directions.  We believe making these businesses independent will give each of them more freedom to invest in and pursue new growth strategies in their unique core markets.  This should sharpen the focus of each business and align their employee incentives and performance more closely with serving the specific needs of their respective markets.  Investors should get greater transparency and understanding of each of these businesses." 
New Imaging Components Company
Varian Imaging Components is a high-volume manufacturer of X-ray tubes, flat panel detectors, connectors and accessories for imaging as well as a supplier of workstations and software for computer-aided diagnostics and image processing.  When completed, the spin-off would establish the new company as a leading global supplier of components, software and engineering services for imaging equipment manufacturers and system integrators in the medical diagnostics, dentistry, veterinary care, security and industrial inspection industries.  "This business will be able to capitalize on trends in digital imaging and build a larger presence in security and industrial applications," Wilson said.  "The new company will be able to leverage its world-renowned X-ray engineering team to work with equipment manufacturers and system integrators to develop new, next-generation imaging systems."
The new imaging components company is expected to have annual revenues of about $575 million and has approximately 1,300 employees around the world.  It is expected that the new company's management team will include Sunny Sanyal, president of Varian Imaging Components, as the new Chief Executive Officer, and Clarence Verhoef, Varian Controller, as Chief Financial Officer.  Additional details regarding the name, structure, leadership and financial operations of the new company will be disclosed at a later time.
Varian Medical Systems
Upon completion of the transaction, Varian will concentrate on providing systems for treating and managing cancer, with distinct businesses in radiation oncology and proton therapy.  These businesses will provide hospitals, clinics and healthcare systems around the world with equipment, software and services for radiotherapy, radiosurgery, brachytherapy and proton therapy.  "We have been a cancer-fighting company for a long time and this opens the door to expanding our portfolio with additional technologies and tools for making treatment of cancer more effective, affordable and accessible for patients around the world," said Wilson.  Varian will continue to operate as one of the world's largest medical device companies focused on cancer treatment, with approximately $2.5 billion in annual revenues and more than 6,000 employees around the globe. 
Previous Spin-Off Success
Varian Medical Systems emerged from a successful spin-off in 1999 when the company spun off Varian Semiconductor Equipment Associates, Inc. and Varian, Inc., each of which was subsequently acquired.  Since then, Varian Medical Systems' annual revenues have grown from less than $600 million to more than $3 billion today with significant improvements in profitability.  "The previous spin-offs created tremendous value, and we believe our next spin-off has the potential to do the same," said Wilson.  "Both Varian and the new company are committed to continuing to provide their customers with great products and services while delivering strong commercial results through operational excellence both during and after the transition."
Transaction Details
The transaction is intended to take the form of a tax-free distribution to Varian stockholders of publicly traded shares of the new company's common stock.  The planned spin-off will be subject to numerous conditions, including final approval by the Varian Board of Directors, effectiveness of a Registration Statement on Form 10 to be filed with the Securities and Exchange Commission, and receipt of an opinion of counsel regarding the federal income tax treatment of the spin-off. 
Varian expects to incur an estimated $35 million in charges for transaction advisory services, assuming the spin-off is completed by the end of the calendar year.  The company does not expect the spin-off to impact the company's non-GAAP financial guidance for fiscal year 2016.  There can be no assurance regarding the ultimate timing of the proposed transaction or that the transaction will be completed.  JP Morgan and Wachtell, Lipton, Rosen & Katz are acting as advisors to Varian in connection with the transaction.

Varian Medical Systems, Inc., of Palo Alto, California, focuses energy on saving lives by equipping the world with advanced technology for fighting cancer and for X-ray imaging.  The company is the world's leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiation. The company provides comprehensive solutions for radiotherapy, radiosurgery, proton therapy and brachytherapy. The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices. Varian is also a premier supplier of X-ray imaging components, including tubes, digital detectors, cables and connectors as well as image processing software and workstations for use in medical and industrial settings, as well as for security and non-destructive testing.  Varian Medical Systems employs approximately 7,500 people who are located at manufacturing sites in North America, Europe, and China and sales and support offices around the world.