Behind the Lens of a Successful Spin-Off

Last year, Varex Imaging Corporation separated from Varian Medical Systems. Not only was the split a win-win, but Varex Imaging also furthered its footprint with the acquisition of PerkinElmer just three months later.

On paper, January 1, 2017, is the date Varex Imaging Corporation was created following a successful spin-off from Varian Medical Systems. But don’t let that date mislead you. To understand the company’s rich history and the path to its successful split, you have to travel back to the 1930s.

Back then, Jack McCullough and Bill Eitel created the original company, Eimac Products. Before long, Eimac earned a reputation for producing high-quality, high-power transmitter tubes and relocating its manufacturing operations to Utah after receiving a large military contract in 1941. With the end of World War ll in sight, Eimac Products began to expand its expertise to include new tube types, such as television cathode ray tubes and microwave tubes for radar applications. Then in 1965, Eimac merged with Varian, and soon Varian became a recognizable name in the world of X-ray imaging.

Today, after decades of success, it became apparent that a spin-off company would be needed to operate and hold the company’s ever-expanding imaging components business. For this purpose, Varian Medical Systems created Varex Imaging Corporation on January 1, 2017. Together, the two companies are now able to concentrate their efforts on the needs of each business and pursue distinct opportunities for long-term growth and profitability in the imaging industry.

That’s the short history lesson. To delve deeper into this extensive process, you need to look toward Kim Honeysett, senior vice president, general counsel, and corporate secretary of Varex Imaging Corporation, who was instrumental in helping to lead the successful spin-off.

With a storied tenure in big law firm and in-house experience, Honeysett has become a valued and trusted adviser to senior management and the board of directors. Prior to the separation of Varex from Varian Medical Systems, Honeysett served as vice president, assistant general counsel, and assistant corporate secretary for Varian Medical Systems. In that role, she advised Varian’s Board of Directors, executive management, and corporate functions on everything from business development and investor relations to human resources and IT. Honeysett was also responsible for corporate governance, general compliance matters, litigation, and global subsidiary governance.

As a result, Honeysett knew the ins and outs of how to make this spin-off a success. In connection with the separation, Varex made roughly a $200 million cash payment to Varian, according to a news release from Varex Imaging. Varex funded this payment from its roughly $300 million revolving credit facility. As a result, the balance of undrawn funds remain available to fund working capital needs and other general corporate purposes, as stated in the news release.

Varex Imaging Corporation has now established itself as a leading innovator of X-ray imaging components, which include tubes, digital flat panel detectors, and other image processing solutions, which are key components of X-ray imaging systems. To this day, Varex’s components are used in medical imaging, as well as in industrial and security imaging applications.

“Much of our time recently has been filled with meetings, calls, and road show presentations with the investor and analyst community,” says Sunny Sanyal, president and CEO of Varex Imaging, in a news release. “Overall, the past year has been an exciting time for us, and I want to thank all the people at Varian and Varex who devoted so much time and effort to make the separation a success.”

Sanyal, Honeysett, and the rest of Varex’s leadership team didn’t slow down, though, in a task to further evolve the company. Just two months after the spin-off, Varex Imaging Corporation acquired medical imaging business PerkinElmer for about $276 million. PerkinElmer develops, manufactures, and sells digital detectors that are key components in medical and industrial X-ray imaging systems made by global
OEM manufacturers.

According to a news release from Varex Imaging Corporation, the acquisition is expected to add roughly $140 million in annual sales, and Varex believes it will be transformative to the company’s digital detector operations. It will also enable the company to increase innovation, leverage its manufacturing scale, and expand its cost leadership position.

“We are very excited about the opportunities and prospects of adding this imaging expertise into the Varex organization,” Sanyal says in a news release. “I want to welcome our new employees to Varex, and I look forward to having the combined team focused on integrating our operations to achieve our goal of producing the broadest, most cost-effective portfolio of components for the imaging industry.”

One of the reasons for the acquisition is that PerkinElmer is highly complementary to Varex’s imaging detector business and has a similar financial profile, according to the news release.

“Customer overlap is minimal, and we see revenue and cost synergy opportunities that we expect to achieve over time,” Sanyal says in the news release. Some of these opportunities include: adding new digital detector technology to the Varex product portfolio, significant, new cross-selling opportunities for X-ray imaging solutions, leveraging combined volumes to gain manufacturing productivity, and further expansion in the Industrial imaging market, he adds.

With Honeysett, Sanyal, and Varex Imaging Corporation’s leadership team continuing to make strides, there’s no limit to what the company can accomplish as they further add to the rich history of the evolving company.

The Origins Before the Split

Jack McCullough and Bill Eitel were two radio amateurs in 1932 when they decided to build high-power transmitters to work some of the twenty-meter overseas stations that were being heard in California. To their dismay, however, they found that the expensive transmitting tube they purchased was not compatible at one thousand volts.

As a result, they decided they could build a better tube that would work at a low voltage. That tube ended up being the 150T triode. From this humble beginning, the company steadily expanded. Decades later, it would merge with Varian. Now after splitting with Varian to form Varex, the company that started with a relatively simple tube is now making breakthroughs in everything from medical devices to advancements in X-rays and lenses.