Medical-device Maker Lumenis to Be Sold to Hong Kong's XIO for $510 Million

$14-a-share price is 16% premium over company's Nasdaq price on the eve of the announcement.

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Israel's Lumenis, which makes equipment for surgical, ophthalmology and aesthetic applications, said Thursday it was being sold to the Hong Kong investment company XIO Group for $510 million.

The sale comes just less than a year-and-a-half after the company returned to the stock market after a 10-year hiatus and marks another step in the deepening business relations between Israel and China.

XIO agreed to buy Lumenis at $14 a share, a 16% premium over the company's $12.08 closing price on the Nasdaq Wednesday. In pre-market trading, Lumenis shares shot up to $13.65, nearly closing the gap.

If competed, it will the largest buyout of an Israeli tech companies this year, beating out the $450 million Pitney Bows’ paid for Borderfree and the $433 million Francisco Partners paid for ClickSoftware.

"Over the past three years we have managed to transform Lumenis into a strong, growing and profitable company," said CEO Tzipi Ozer-Armon. "We have refocused our strategy, introduced new products, and tripled our EBITDA. Furthermore, we have created a very bright and promising future for Lumenis by building a robust pipeline of innovative products, a strong sales team in each region, and by enhancing our global brand recognition."

The company, whose products use laser and radio frequency technology to let doctors perform procedures such as removing kidney stones, unwanted hair and glaucoma, said last month it was on track to reach sales as much as $310 million, a 23% increase from 2012.

Adjusted earnings before interest, taxes, depreciation and amortization, the company said, would be in the range of $35 million to $37 million, an increase of as much as 14% over 2014, despite an unfavorable exchange rate environment.

The sale is subject to approval by Lumenis' shareholders and regulatory approvals, but is expected to close in September 2015, Lumenis said. It said its two largest shareholders, Viola Group and XT Hi-Tech Investments, which together control 59% of the shares had agreed to support the sale.

The Leumis sales come amid surging interest by Chinese companies in Israeli companies, both in high-tech and in other industries. Bright Food competed its acquisition of Tnuva, Israel's biggest food maker, this spring while XIO is among the Chinese buyers are among those bidding to buy control of the insurers Clal Insurance and Phoenix.

Since 2012, some 30 Chinese investors have entered the Israeli high-tech scene and put money into over 80 startups, according to IVC Research Center, which tracks the venture capital and high-tech industry. Earlier this year there werereports that China's company Fosun Pharma, which bought the Israeli maker of aesthetic medical devices Alma Lasers in 2013, was eyeing Lumenis.

Lumenis has had a tumultuous history. It was delisted from the Nasdaq 10 years ago after the U.S. Securities and Exchange Commission alleged that the company overstated its 2002-03 revenues. Viola and XT bought a 75% stake in the company in 2006  to $1290 milion. Based on Yokenam, outside of Haifa, the company today employs 1,000 people, a third of them in Israel. 

Goldman Sachs acted as the financial adviser to Lumenis in respect of this transaction. Morgan Stanley acted as the exclusive financial advisor to XIO Group.