Varian(VAR) Completes Varex Imaging(VREX) Spinoff

After a bit of a delay and 17 years after it was spun off from Varian Associates, Varian Medical Systems (VAR) finally completed the spinoff of its imaging component business, Varex Imaging (VREX). Shareholders yesterday should have received 0.4 VREX shares for every one VAR share owned, so one needed to have owned at least 3 VAR shares in order to have received 1 VREX share. The new company is ‘focused on being a high-volume manufacturer of X-ray tubes, flat panel detectors and high-voltage connectors as well as a supplier of imaging software and specialized accelerators for high-energy x-ray imaging.’

Varian’s CEO Dow Wilson was excited about the transaction and hey, I would be too if I just received a $200m parting gift:

We are very pleased that we were able to complete this successful separation and create two strong independent companies…Varian is now focused exclusively on expanding its position as the leader in systems and software for the treatment of cancer. As a cancer-fighting company we are increasing our efforts to make the treatment of cancer more effective, affordable and accessible for patients around the world.

Both companies will need to need to use their ‘exclusive’ focus to return to growth and increase margins. For one day at least, investors were pretty happy with the spin off. Despite an overall market decline, Varex jumped over 7%. Varian was also positive on the day and expects to repurchase 2 million shares in Q2 this year. The jump is a bit surprising considering most expected to suffer from forced selling. Although Varian remained in the S&P 500 index, Varex joined the smaller S&P Smallcap 600 Index. Of course one day is hardly much a sample so lets see what the future brings – hopefully it will be as successful as the parent company’s journey over the past 17 years.

Disclosure: Author holds no position in any stock mentioned.