General Scanning and Lumonics To Merge
By Kristin Lewotsky
In a proposed merger of equals, General Scanning Inc. and Lumonics Inc. have signed a definitive agreement to combine the two companies. The resulting company will be called GSI Lumonics Inc.
Under terms of the proposed merger, each General Scanning shareholder will receive 1.347 shares of Lumonics per General Scanning share, while Lumonics shareholders will retain their existing holdings. As a result, current shareholders of each company will own approximately 50% of the combined company following the merger.
The deal will be accounted for as a purchase in the US. Although on paper Lumonics survives, all sides emphasize that the deal involves a merger of equals. "The prime reason the Canadian company survives is that the effective tax rate of the combined companies can be reduced by 2 to 3 percentage points," said General Scanning CFO Victor Woolley.
The combined enterprise will be listed on both the Toronto and Nasdaq exchanges and will report its financial results in U.S. dollars. On a pro forma basis, the new company would have annual sales of approximately US $330 million.
Positioning for the long haul
"You need consolidation to get critical mass," said Woolley. "Customers require service in Malaysia and the Phillippines, and also in Dallas. To meet their needs, you need a bigger organization—greater sales and service worldwide." Hence, the merger.
The economy also played a role in prompting the decision. "The stock prices of both companies are low, and it made sense to combine," Woolley said. "When the business cycle turns, we'll be that much stronger." A soft period in the business provides GSI Lumonics with the time necessary to effectively integrate the two companies. "We'll be a much more powerful player coming out of the recession than we would have been."
Although complete integration plans have not been developed, the operational headquarters will be near Boston, MA, probably at or near General Scanning's current Watertown, MA headquarters.
Charles D. Winston, President and Chief Executive Officer of General Scanning Inc. will be CEO of the new company, and Lumonics president and CEO Warren Nix will be president and COO. The eight-member board of the combined companies will consist of four members from the Lumonics board and four members from the General Scanning board; Lumonics chairman Robert Atkinson will be chairman.
Other members of senior management will be reassigned as appropriate. "We don't really see any losses of positions there," says Woolley.
General Scanning manufactures laser systems, subsystems, and component for applications semiconductor, electronics, aircraft and medical industries. Lumonics produces marketing of laser-based advanced manufacturing systems for semiconductor, electronics, aerospace, automotive and packaging markets.