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Leading radiosurgery systems maker Accuray Inc (ARAY - Analyst Report) has completed the acquisition of its rival TomoTherapy. This follows the recent approval of the transaction by TomoTherapy’s shareholders. The $277 million cash and stock deal was announced in March 2011. TomoTherapy shares ended trading on NASDAQ on June 13.

While Accuray’s corporate headquarters will remain in Sunnyvale, California, it will retain a strong presence in Madison, Wisconsin, where TomoTherapy's headquarters is located. UBS Investment Bank, a division of UBS AG (UBS - Analyst Report), and law firm Gibson, Dunn & Crutcher served as financial and legal advisors, respectively, to Accuray on the deal. BofA Merrill Lynch, a unit of Bank of America (BAC - Analyst Report), acted as advisor to TomoTherapy.

The merger creates a leading player in the radiation oncology space. The combined entity will now offer state-of-the-art therapies, ranging from high-precision radiosurgery to image-guided intensity-modulated radiation therapy, for treating cancer and other diseases. The unified company, with combined sales of more than $400 million, will have a significant global presence. 

TomoTherapy, with annual sales of $195 million, markets advanced radiation therapies for treating multiple cancer types. The acquisition bolsters Accuray’s foothold in the radiation oncology space. Besides, it has increased the company’s installed base to more than 550 units (from 226) across 32 countries and doubles its global employee count to over 1,000. 

Accuray expects the buyout to be accretive to its earnings in the fiscal year beginning July 1, 2012, and offer opportunities for cost synergies through increased operating efficiencies, complementary patient base and overhead reductions. The company targets operating cost savings of $25 million in fiscal 2013.

Accuray is a global leader in the field of radiosurgery and provides a non-surgical treatment option for patients diagnosed with cancer. While the company is expected to benefit from the gradual recovery in hospital capital equipment spending, it remains susceptible to reimbursement uncertainties surrounding its products.

Moreover, its CyberKnife robotic radiosurgery systems face a stiff challenge from competitive product offerings of  Varian Medical (VAR - Analyst Report). Currently, we are Neutral on Accuray.

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