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Agilent Acquires J&W Scientific Stressing Importance of Consumables.

The GC column market will never be the same. With the March 28th acquisition of J&W Scientific by Agilent Technologies, the future of the GC column market suddenly looks very different. J&W Scientific is the leading manufacturer of GC columns, with estimated annual sales of around $30 million in 1998. Agilent Technologies, through its Chemical Analysis Group division, is the third largest vendor in the market, just behind Supelco. With the merging of the number one and number three players in this market, the competitive landscape looks a lot tougher for the many small vendors that make-up this fragmented market.

J&W Scientific has established itself through the high quality, variety and innovation of its products and its specialized approach to the market. The company is estimated to account for 18% of the capillary GC column market worldwide and around 38% of the North American market. J&W Scientific, and its three subsidiaries, Humonics, R&D Separations and Unimetrics, manufacture GC columns and related GC products as well as capillary electrophoresis and solid phase extraction products. In addition, the company provides OEM and private label products, flow measurement devices, gas purifiers and sample prep equipment. In fact, the company boasts that it "stocks more capillary GC columns in more configurations than anyone else in the industry."

Roughly 80% of J&W Scientific sales are in the GC products markets. Of this 80%, approximately 79% is made up of GC column sales with the other 21% consisting of sales of syringes, gas purifiers and flowmeters. Agilent is also a major competitor with the company in the flowmeter market. J&W Scientific offers research grade columns ranging from porous layer columns for gas analysis to ultra low bleed columns for GC-MS. Company trademarks include Megabore, Microbore, Connex, Durabond and DuraGuard. In addition, J&W Scientific has made a name for itself as a manufacturer of customized columns.

Approximately 10% of the company's sales are in the capillary electrophoresis market, where it sells wall-coated capillaries, bulk columns and buffer kits. Its solid phase extraction line consists of the Accubond and EVIDX SPE cartridges. SPE sorbents and SPE vacuum manifolds are also among the company's products in this area.

Founded in 1975, the company was the first to develop a technique for permanently bonding chemical coatings to the glass column. The company had been owned by Curtin Matheson Scientific and then by Saratoga Partners, a corporate buyout firm led by J&W Scientific's founder, Walt Jennings. In the late 1990s, J&W Scientific acquired Humonics, a gas and liquid flow measurement device company, and R&D Separations, a specialized manufacturer of carrier gas purification traps and systems. In 1998, J&W Scientific purchased Unimetrics, which makes syringes.

The GC market itself may provide some clues for the timing of the deal. The GC column market is estimated to be an over $120 million a year business. However, while the GC installed base is large, the GC columns market is growing at around 6%. The initial GC systems market itself is exhibiting little, if any, growth. No one at J&W Scientific could be reached for comment but several theories seem to provide some tentative answers. Although the terms of the deal were not disclosed, J&W Scientific investors perhaps wanted out of this market, which, though growing, is not growing fast and has a future where profitability will most likely decline.

For Agilent, it is important to make gains in all parts of a mature market such as GC. But Agilent does not plan to remake the company into another Agilent. Paul Cannon, worldwide marketing manager for the consumables and accessories business unit of CAG, emphasized that what made J&W Scientific, including its technologies and marketing, will remain. It will not be a case of a small company being swallowed by a big company, as Mr. Cannon emphasized, but rather an "integration" of two companies. In fact, Agilent's columns will be manufactured at J&W Scientific's Folsom location.

This news indicates the direction in which Agilent Technologies' CAG is heading. After numerous recent announcements regarding its life science business, CAG's strategy has clearly seemed oriented to the fast growing life science market. The columns market for the company has also been extremely successful, but perhaps has not achieved the desired growth rates. Flush with money from a highly successful IPO and reorganized organizational structure, one of the company's primary strategies appears to be growth through acquisition. As Mr. Cannon told IBO, "with the split from HP now, Agilent Technologies is looking at opportunities to grow by acquisition where we can and we found J&W, their business and their model, very consistent with where we want to go."

Even more so, it appears Agilent is pursuing not only a dominant position in the GC column market, but J&W Scientific's customers as well. "Our integration plan is very much focused on customers, and as such we know that J&W has some unique approaches to technical and application support, as well as some unique approaches to the way they do marketing and market to their customer," stated Mr. Cannon. Indeed, Agilent not only has the opportunity to gain new GC column customers, but new GC customers. "One of the opportunities frankly for us is now to really take good enough care of that customer base that they'll want to buy from our much wider portfolio of products that we have."

Most importantly for Agilent, the acquisition allows it to expand its consumables business, which has been a consistently strong performer for the company. E-commerce will spur the consumables profit margin by reducing transaction costs. Agilent can also benefit from J&W Scientific's e-commerce strategy which promises a twenty-four hour turnaround on factory direct orders made through its website.

With the top five GC column companies accounting for approximately $80 million in sales in 1999, this merger will shift the market dynamics. Some of the smaller companies may be squeezed out of the market and the larger competitors, such as Alltech, Restek and Varian, will have to alter their strategies to compete with a new number one company with numerous resources, a solid customer base and a quality product line.
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Comment:Agilent Acquires J&W Scientific Stressing Importance of Consumables.
Publication:Instrument Business Outlook
Article Type:Brief Article
Geographic Code:1USA
Date:Mar 31, 2000
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