Tickers in this Article: SONO, GE, SI, PHG, MR, SYNO, BAX
There was little mystery in seeing SonoSite (Nasdaq:SONO) get an acquisition bid. Not only has this relatively small manufacturer of portable ultrasound systems been a logical target for years, but the company began to actively and explicitly sell itself starting back in November. In a week that has seen another logical target (Synovis (Nasdaq:SYNO) get a bid from a not-so-likely buyer (Baxter (NYSE:BAX), the fact that it was Japan's Fujifilm that stepped up to buy the company makes this an a somewhat unusual story.

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The Deal
Fujifilm will be acquiring SonoSite for $995 million in cash, or about $54 per share. That's a 28% premium to Wednesday night's close and a 75% premium to the price of SonoSite's stock before it was widely known that the company was looking to sell. SonoSite is going out at a little more than three times trailing revenue, a multiple curiously similar to that of Synovis and one that is not all that robust by historical small-cap med-tech standards, but isn't so unreasonable given the performance of the company. (For related reading, see An Introduction To Small Cap Stocks.)

What Fujifilm is Getting
To SonoSite's credit, it managed to carve an almost 40% market share in the portable ultrasound market while competing with the giant General Electric (NYSE:GE) (which holds about 50% share). There's been ample litigation between the two companies for years, but SonoSite was able to make a name for itself with solid technology, good product features and a pure commitment to the portable market.

SonoSite basically succeeded by being willing to swim against the tide. While companies like GE, Siemens (NYSE:SI) and Phillips (NYSE:PHG) were hard at work developing more powerful "Big Iron" ultrasound systems for radiology departments, SonoSite saw the opportunity in point-of-care imaging. It would be inaccurate to say that SonoSite's hand-carried systems are just as good as the state-of-art installed systems, but that's not the point. Just as armies find use for both small arms and heavy artillery, so too are there appropriate times and places for both types of imaging systems.

Interestingly, although SonoSite has shown very impressive revenue growth over its many years, would-be rivals like Siemens, Phillips and Mindray (NYSE:MR) have never established any serious presence in this segment.

Wait A Minute ... Fujifilm?
Investors may be surprised to see Fujifilm stepping up to buy this company. After all, Fujifilm is still best known in the United States for its photographic film and its iconic green color schemes. While Fujifilm most definitely has its heritage in photographic film, the company has been very active in diversifying its business in recent years so as to avoid the fate of Polaroid and Eastman Kodak.

To that end, Fujifilm has targeted healthcare as an area of focus. In addition to legacy businesses in somewhat logical fields like X-ray systems and film, Fujifilm has looked for ways to leverage technological capabilities like control technology for chemicals and various production and analytical controls. Recently, in fact, Fujifilm formed a joint venture with Kyowa Hakko Kirin to produce biosimilar pharmaceuticals (basically generic versions of antibody therapies like Abbott's (NYSE:ABT) Humira).

The Bottom Line
Relative to the market today, SonoSite shareholders are getting a respectable deal. Yes, there is real potential in new products like the high-end Edge and the market for portable ultrasound is still under-penetrated. But it was not as though SonoSite was tearing up the market recently by its own efforts.

Given how long SonoSite was rumored to be on the block, it seems fair to assume that its bankers shopped this company to every logical buyer out there - including Siemens, Phillips, Samsung and perhaps even other Japanese companies like Hitachi or Olympus. Fujifilm's offer is likely the best that investors can, or should, expect. (For related reading, see Analyzing An Acquisition Announcement.)

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At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

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