Dako sails with Swedish ownership

Denmark-based Dako, parent company of the division formerly known as Cytomation, recently joined the list of Northern Colorado employers that will operate under private-equity ownership.

In late February, private equity firm EQT of Stockholm, Sweden moved to purchase the cancer-diagnostics company for 7.25 billion kroner, or about $1.29 billion. The deal is expected to close in April or May.

The Dako buyout is not expected to affect the 250 employees at the Fort Collins site, nor is it likely to sway Dako from its previously charted course.

“There are no plans for any closures or corporate restructuring,´ said Cindy Coughenour, general manager of the Fort Collins site.

The Fort Collins site specializes in producing flow-cytometry analysis instruments, but also employs people in other Dako business groups. Flow cytometry is a method used in the analysis of biological material by detection of the light-absorbing properties of cells or subcellular elements that pass in a narrow stream through a laser beam. It is used to analyze the number and percentage of living cells in a sample, as well as detect certain cell characteristics. Cancer diagnostics is a common application of the technology.

Dako recently finished a restructuring that was almost two years in the making, Coughenour said. The restructuring was aimed at standardization and automation in the lab, producing greater efficiency. It also resulted in the formation of the flow- cytometry business unit, headquartered in Fort Collins.

“It’s the best of both worlds,” Coughenour said of the restructuring. The Fort Collins unit now has the leverage and support of Dako, but also has the autonomy and flexibility to react quickly to customer needs.

Home rule

The local autonomy comes after several years of concentrated operations from Denmark. In 2003, the company parted ways with Nigel Ferry – the longstanding CEO of Cytomation. Ferry joined Fort Collins-based Cytomation and stayed on with the company as executive vice president after the 2002 merger with Dako. The split was apparently over a disagreement with the board of directors.

“It has become clear … that there are significant differences of opinion as to how DakoCytomation should be organized and run going forward,” read a statement on the Dako Web site regarding the split. “The board of directors supports the goal of one global company. At the same time, corporate management will reinforce communication and continue to build a better understanding of the company’s vision and strategy. Specifically, focus will be on execution as well as clarity of decision-making and the accompanying accountabilities.”

The new structure is aimed at increasing responsiveness and accountability to customers, Coughenour said. The effects of the restructuring are already obvious. In the past, media calls were first fielded through Dako spokespeople in Denmark. The result was often long delays and trouble coordinating with the vastly different time zones. Today, the Fort Collins site employs a communications representative, and Coughenour is able to field media inquiries.

Since the deal is still pending, there are few details about specific plans for Dako. However, EQT has indicated that little is likely to change.

Build the brand

“Our intention is to support management in the further development of the company in accordance with the strategy as outlined by management,´ said Ole Andersen, senior partner at EQT. “Dako will remain headquartered in Copenhagen, Denmark, and we will continue to build on the Dako brand in order to realize Dako’s full potential.”

EQT is actually a group of private equity funds that manage about $13.8 billion in equity in 10 different funds. Its investments are in companies headquartered in northern Europe and China. The company’s past investments have ranged from one to eight years before exit.

Coughenour predicts that the buyout will provide the company with greater consistency and capital support.

“We feel we will be able to grow faster,” she said.

This would be good news for Northern Colorado. Dako’s ties in the community run deep.

Cytomation was formed in 1988 by a group of Australian scientists. Mervyn Jacobson, president and CEO of XY Inc., said he pushed for the Fort Collins location. Jacobson was the chairman, director and largest shareholder of Cytomation.

Jacobson said it is because of Cytomation’s proximity to Colorado State University that XY came to be. XY was founded through a partnership with the Colorado State University Research Foundation and Cytomation in 1996.

XY combined the CSU expertise in animal reproduction with the cell-sorting technology of Cytomation to produce sex-selected sperm. The company markets its technology commercially to the livestock industry – cattle and sheep. For example, in China sex selection technology is used to produce much needed dairy cows.

The company has also proved its technology in dolphins, water buffalo, domestic cats and, most recently, dogs.

XY remains linked

Jacobson sold his shares in Cytomation around the time of the Dako merger, focusing his attention on XY’s booming business. Jacobson estimates there are now more than 1 million sex-selected animals in the world born through XY’s technology. Despite Jacobson’s departure, the companies remained close.

“XY and Dako have always cooperated and worked closely together,” he said. Dako produces a flow-cytometry machine exclusively for use by XY licensees. All XY licensees must use Dako’s instrumentation.

Jacobson said he doesn’t know specific details related to the Dako buyout, but he isn’t concerned.

“In our view, that’s a very positive move,” he said. “I don’t think it will change too drastically.”

So far, Northern Colorado’s employers haven’t seen any major negative impacts from the private equity boom. Equity firms KKR and Silver Lake Partners purchased Agilent’s semiconductor products group in late 2005. The new company, Avago, has since divested several product lines.

The divestures affected only a handful of employees in Fort Collins.

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