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OSI acquires new screening technology. (Executive briefing: news, trends & market intelligence for instrument executives).

Hawthorne, CA 11/1/02--OSI Systems has entered into a definitive agreement to acquire Ancore, a provider of advanced inspection systems based upon Pulsed Fast Neutron Analysis (PFNA) and Thermal Neutron Analysis (TNA) for land, sea and air transportation. For the acquisition, OSI will pay $2 million in cash and issue 347,915 shares of OSI common stock, and may pay an additional $2 million in cash and $4.69 million in cash or stock prior to May 10, 2003 based upon performance criteria. Over the next five years, OSI will pay former Ancore stockholders an earn-out of 6% of the price of each PFNA inspection system sold that "represents a potential generational advance above and beyond the current contraband detection systems," up to $750,000 per system. A typical large cargo PFNA installation is priced at $10 million to $15 million. Such earn-outs are capped at an aggregate of $34 million, and Ancore stockholders are subject to certain restrictions on the sale of OSI stock.

The consolidation trend in the security inspection market continues (see IBO 10/15/ 02). Since 2000 Rapiscan has marketed and distributed Ancore's products worldwide. PFNA and TNA can detect explosives, drugs, chemical weapons, nuclear devices and shielded "dirty bombs" non-intrusively and without the need for human screeners, and can be modified for new types of threats by adding a new elemental signature. Ancore is developing a PFNA system for airline baggage systems. This acquisition should position OSI to prosper from the next generation of inspection technologies.
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Publication:Instrument Business Outlook
Article Type:Brief Article
Geographic Code:1USA
Date:Nov 15, 2002
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