Why Gen-Probe Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of diagnostic test company Gen-Probe (Nasdaq: GPRO  ) surged 19% on Monday after medical device maker Hologic (Nasdaq: HOLX  ) agreed to acquire it for about $3.75 billion.

So what: The all-cash deal values Gen-Probe at $82.75 per share and represents a 20% premium to its closing price on Friday. Hologic is making the move to expand its diagnostics business, but judging from its own stock's 10% decline today, Mr. Market isn't pleased with the price being paid to do it.

Now what: Hologic expects the transaction to close in the second half of 2012 and add about $0.20 per share to its earnings within this first year. "When you look at this business as a combined entity," Hologic CEO Rob Cascella noted, "this is our diagnostics franchise which will now be the largest franchise within Hologic, and it will be primary dedicated to women's health, which is the emphasis behind Hologic's other businesses like breast health." So while Gen-Probe is now all rallied out, today's pullback in Hologic shares might be worth pouncing on.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On April 30, 2012, at 4:40 PM, n122x wrote:

    My guess is that Hologic's 10% drop today had a lot more to do with the Conceptus lawsuit settlement than it did with the Gen-Probe acquisition.

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