Thursday, April 9, 2009

Varian Medical Systems: A Potential Takeover Target?

. Thursday, April 9, 2009

By stockOzone team

Shares of Varian Medical Systems Inc. (NYSE: VAR) jumped over 6% in Thursday's trading session on mounting speculation that the Palo Alto, California-based company is a takeover target.

In the options market too, heavy call buying activity was witnessed, indicating that traders are betting upon a potential acquisition of the company.

It is being rumored that the German engineering conglomerate Siemens AG is interested in buying Varian. Siemens has ample cash and is looking for opportunities to expand into cancer therapy market. It is also working on a new oncology platform. According to sources, Siemens' offer could be in the neighborhood of $45 per share.

Varian Medical Systems (NYSE: VAR) is engaged in the design and manufacture of advanced equipment and software solutions for treating cancer with radiation. Methods include- medical oncology, radiation oncology, radiosurgery, brachytherapy, and proton therapy. Varian also develops and manufactures x-ray tubes for original equipment manufacturers, replacement x-ray tubes, and flat-panel digital x-ray detectors for imaging in medical, scientific and industrial applications.

Varian Medical has continued to perform well despite recession. Early in January, Varian reported that first quarter net income jumped to $68.8 million, or 56 cents per share, compared with $55.5 million, or 46 cents a share, in the prior year quarter. Quarterly revenue increased 13% to $508.7 million.

Coincidentally, the company is also celebrating its Tenth Anniversary. Varian Medical Systems is now bigger than its parent company (Varian Associates ) was at the time of the division. The company nearly quadrupled its annual revenues, growing from $542 million in fiscal 1998 to $2.1 billion in fiscal 2008. It increased annual operating earnings from $24 million to $419 million over the same period while growing annual net earnings grew from $8 million to $295 million.

Shares of Varian Medical Systems finished at $33.38, up $2 or 6.37%.

Disclosure: Author does not own any of the stocks discussed here.

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