The Westerly-based cardiovascular-imaging firm agrees to be bought for $132.5 million by Agfa-Gevaert NV.

01:00 AM EDT on Tuesday, April 19, 2005

BY DAVID McPHERSON
Journal Staff Writer

Heartlab Inc. of Westerly, a Rhode Island success story in the health-care information technology industry, has agreed to be purchased by a Belgian company for $132.5 million.

Agfa-Gevaert NV will pay cash for all of Heartlab's shares when the deal closes after regulatory approvals.

The purchase expands Agfa into the cardiovascular-imaging and information-management systems field that Heartlab has helped lead.

Agfa is an imaging and information technology company that operates in both the graphics and health-care industries. It is based in Mortsel, Belgium, and employs more than 18,000 people worldwide.

Under the agreement announced yesterday, Agfa's cardiology business will be based at Heartlab's recently enlarged headquarters in Westerly and be led by Robert Petrocelli, Heartlab's cofounder and chief executive officer.

"We're going to be able to remain here as an important center of excellence," Petrocelli said in a telephone interview.

He said he expects the job growth that Heartlab had been planning will continue under Agfa. Heartlab now employs more than 160 people, with about 60 percent based in Westerly, Petrocelli said.

"Cardiology is a cornerstone of our health-care IT strategy, and with the integration of Heartlab, we are poised to become a leader in cardiology solutions worldwide," Agfa's health-care business group president Philippe Houssiau said in a statement.

Once a candidate for an initial public offering, Heartlab had concluded that it needed to join with a larger, global player in its industry to compete overseas, Petrocelli said.

The company faced the choice of becoming part of a large, multinational conglomerate or be part of "a large, but not too large a business" like Agfa. "We will fill an important need in their product portfolio," he said.

Heartlab has done well in North America and established a presence in Japan, Petrocelli said, but to compete in Europe and other parts of Asia, it needed to be part of a larger company.

The future of the health-care information technology business, he said, is toward companies with "a larger portfolio of products available" and away from systems sold on a stand-alone basis.

Petrocelli, a physicist and computer scientist educated at the University of Rhode Island, and Jonathan Elion, a cardiologist and computer scientist, founded Heartlab in 1994. The company initially used CD-ROMs to store cardiac tests rather than the customary 35mm film.

Heartlab now designs and supplies digital image and information networks for cardiology that it sells to cardiovascular-care centers around the world.

It was named one of America's fastest-growing private companies for four straight years by Inc. magazine.

Last year, the company generated $38.3 million in revenues and earnings before interest, taxes, depreciation and amortization of $5.4 million.

The company had considered an initial public offering to help finance its growth, but it pulled back after the terrorist attacks of Sept. 11, 2001.

Petrocelli said the company had a meeting with investment bankers scheduled for Sept. 12 to consider an IPO, but those plans were put on hold.

"The markets are no longer interested in small tech companies and you need to have much larger scale to ensure you have good results," Petrocelli said.

The sales growth Heartlab had been experiencing prior to Sept. 11 flattened during 2002 and much of 2003, Petrocelli said. "They came raging back in '04," he said.

Petrocelli called the sales announcement good news for Rhode Island, and it will allow his company to remain focused on the work it does in the cardiology field.

Shares of Agfa, which trade on the Brussels stock exchange, are up 32 percent over the past year.

Contact David McPherson at dmcpherson [at] projo.com.