SEOUL - South Korea's Samsung Electronics is further building its burgeoning presence in the healthcare sector through the takeover of the country's leading medical equipment maker Medison Co. from a private equity fund.

In October, Samsung Electronics submitted a letter of intent to take over Medison. Samsung's competition for the acquisition included several Korean companies and Japan's Olympus (Also see "Korea's Samsung Electronics Hopes To Expand Healthcare Footprint By Taking Over Device Firm" - Scrip, 21 October, 2010.).

Two months after it unveiled its intentions, Samsung Electronics - the key affiliate of South Korea's leading conglomerate Samsung Group - took over a controlling 43.5 percent stake in Medison and 100 percent of the leading local medical-equipment maker's affiliate Prosonic for roughly KRW 300 billion ($262.8 million).

Samsung Electronics officials, including spokesman James Jung, were not available for comment, but the head of Samsung's Health and Medical Equipment division Bang Sang-won told local media that Samsung's medical equipment business will be successful when "the experience and unique strengths of Medison's skilled employees are combined with Samsung's technology, brand power, and global management abilities."

Synergy Could Be Created By Other Samsung Affiliates

Industry watchers, including Choi Jong-Kyung, an analyst at HMC Investment Securities, say some visible "synergy effects" could be generated as Samsung Electronics teams up with other Samsung Group affiliates.

"Because other Samsung Group affiliates are also pursuing biosimilar and healthcare projects along with Samsung Electronics, some synergy effects could be generated," Choi told PharmAsia News. "And, given the fact that they need money - much money - to survive in the healthcare and biosimilars business, Samsung Electronics is free from such worries."

Samsung Group's other profitable affiliates such as Samsung Techwin, Samsung SDS, Samsung Electro-Mechanics and Samsung Medical Center are key players in the group's healthcare and biosimilars business.

The leading blue-chip stock on the KOSPI main stock exchange, Samsung Electronics dominates Korea's local market of electronics products, and is also the world's second-largest maker of cell phones after Nokia.

Established in 1985, Medison grew to be one of the leading global producers of three-dimensional diagnostic ultrasound systems. In 2002, Medison filed bankruptcy; it was acquired by a private equity fund in 2006. Since that time, the company has seen steady growth.

Armed with a strong global sales network, Medison is able to compete with multinationals like General Electric , Philips, Siemens and Toshiba, according to industry watchers.

Korean Government Bolsters Local Medical Equipment Sector

Samsung Electronics' takeover of Medison comes at a time when the Korean government is trying to build up the country's medical equipment sector (Also see "South Korea To Strengthen Medical Equipment Sector" - Scrip, 26 November, 2010.).

Samsung Group, in particular, has been ramping up efforts to establish itself in both the medical equipment and biosimilars sectors. That initial push came when Samsung Group Chairman Lee Kun-hee returned in March as chairman of Samsung Electronics less than two years after he stepped down to face charges for financial wrongdoing.

In April, Samsung Electronics bought a controlling stake in Ray Co., a small X-ray company.

One month later, Samsung Group announced it was entering the healthcare sector, saying it would invest an initial $4.1 billion as part of a plan to generate profits beyond its traditional pipeline of semiconductors and electronics products (Also see "Samsung Group Set To Enter Biosimilars Market With $1.9 Billion Investment" - Scrip, 17 May, 2010.).

Samsung's entry into the healthcare and biosimilars sector, however, made established Korean companies such as LG Life Sciences and Celltrion wary as Samsung tried to recruit experienced employees from the two companies (Also see "Korea's Samsung Electronics On Manhunt For Biosimilar Talent As Local Companies Keep Wary Eye On Competition" - Scrip, 26 March, 2010.).

- Peter Chang (p.chang@elsevier.com)

Samsung Electronics Takes Over Leading Medical Device Maker Medison

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