TomoTherapy Shares Hit New High On Accuray Merger

Shares of TomoTherapy Inc. (NASDAQ: TOMO) touched a new 52-week high of $4.70 on Monday after it agreed to be acquired by Accuray Inc. (NASDAQ: ARAY) for $4.80 a share in cash and stock or a total of about $277 million. The combination is expected to create the premier radiation oncology company.

The Madison, Wisconsin-based TomoTherapy's shareholders will each receive $3.15 in cash and 0.1648 shares of Accuray common stock. Based on Accuray's Friday's closing price, the stock component of the consideration is valued at $1.65 per share. The deal represents a premium of 30.8 percent above closing price of TomoTherapy's shares on Friday of $3.67.

The transaction, which has been approved by the boards of both companies, is expected to close in the second quarter or the beginning of the third quarter of calendar 2011. The closure is subject to customary closing conditions, TomoTherapy shareholder approval and regulatory approvals.

TomoTherapy said in a SEC filing that all of its executive officers and directors entered into deal to vote their shares in favor of the merger, which collectively represented about 11 percent of the company's common stock as of February 28. TomoTherapy also agreed to pay a termination fee of $8 million upon a termination of the deal under certain circumstances.

The Sunnyvale, California-based Accuray, which sells the CyberKnife system, an image-guided robotic radiosurgery system used for the treatment of solid tumors, expects the acquisition to be accretive to its earnings per share in its fiscal year 2013.

The combined entity will have an installed base of more than 550 units in 32 countries, and more than 1,100 employees. The combined revenue of the two companies in calendar year 2010 exceeded $400 million, of which 30 percent was from service of the installed base.

In the deal, UBS Investment Bank served as Accuray's financial advisor, and Gibson, Dunn & Crutcher LLP is its legal counsel. For TomoTherapy, BofA Merrill Lynch served as financial advisor and Sidley Austin LLP served as legal counsel.

TomoTherapy stock gapped open sharply higher on Monday at $4.68 compared to Friday's close of $3.67. The stock touched a new 52-week high of $4.70 during Monday's trading. The stock closed Monday's regular trading up 24.52 percent at $4.57 on a volume of 19.14 million shares on the NASDAQ stock market. The stock traded between $2.59 and $4.70 during the past 52 weeks.

Accuray stock gapped open sharply lower on Monday at $9.60 compared to Friday's close of $10.01. The stock closed Monday's regular trading down 10.09 percent at $9 on a volume of 3.54 million shares on the NASDAQ stock market. The stock traded between $5.77 and $11.16 during the past 52 weeks.