Teledyne to Buy Varex Imaging for $1.1 Billion as Varex Shares Jump 48%

Teledyne Technologies has agreed to acquire Varex Imaging in a roughly $1.1 billion cash transaction that would substantially expand Teledyne’s position in medical and industrial X-ray technology, while giving Varex shareholders a steep premium after several years of uneven operating performance.

Teledyne will pay $18.90 in cash for each outstanding Varex share, a price about 52% above Varex’s Friday closing level. The stated transaction value includes Varex’s equity awards and debt. Both companies’ boards have unanimously approved the acquisition, which is expected to close in early 2027, subject to Varex shareholder approval, regulatory clearances and other customary conditions.

Varex shares surged roughly 48% to $18.43 in Monday afternoon trading, approaching the offer price almost immediately after the deal was announced. Teledyne shares edged higher.

The unusually large move in Varex reflects the size of the acquisition premium. At $18.43, the stock was trading only about 47 cents below Teledyne’s $18.90 offer, leaving a spread of roughly 2.5%. That narrow gap suggests investors were assigning a relatively high probability to completion, although the remaining discount still reflects the time required to close and the possibility that shareholder, regulatory or other conditions could interfere with the transaction.

For Teledyne, the deal is less about entering an unfamiliar industry than filling gaps inside an imaging business that is already its largest operating segment.

Varex fills several holes in Teledyne’s X-ray portfolio

Teledyne already sells a wide range of imaging sensors, detectors, cameras and related electronics across aerospace, defense, industrial, scientific and medical markets. Varex operates closer to the core of X-ray generation and detection.

The Salt Lake City company manufactures X-ray tubes, digital detectors, image-processing components and complete systems used by medical-equipment manufacturers as well as industrial and security customers. Its technology can be found in applications including computed tomography, radiography, fluoroscopy, cargo inspection and industrial testing. Varex says its history in imaging stretches back more than 70 years and that it employs roughly 2,450 people across North America, Europe and Asia.

The overlap with Teledyne is limited enough that the buyer sees the businesses as complementary rather than duplicative.

Teledyne Executive Chairman Robert Mehrabian highlighted three areas in particular. Teledyne already produces X-ray detectors, but it does not make detectors designed for high-radiation environments such as oncology. Varex does. Varex also offers advanced photon-counting detectors for healthcare and industrial inspection, an area where Teledyne does not currently have an equivalent product. Teledyne manufactures several types of vacuum electronics, but it has not produced the X-ray tubes used in radiography, fluoroscopy and CT systems.

Those distinctions help explain why the transaction can expand Teledyne’s addressable market without requiring the company to combine two nearly identical product portfolios.

Photon-counting technology may be especially important. Traditional CT detectors generally convert incoming X-ray energy into light and then into an electrical signal. Photon-counting detectors are designed to count individual X-ray photons and measure their energy more directly, potentially allowing imaging systems to produce more detailed spectral information and improve differentiation between materials. Varex has been investing in photon-counting detector platforms for next-generation CT applications, and management said earlier this year that demand for photon-counting detectors was contributing to momentum in its business.

Teledyne would therefore be acquiring not only established X-ray tube and detector operations, but also technology positioned for a newer generation of medical and industrial imaging systems.

The deal also brings Teledyne deeper into healthcare. Teledyne’s existing imaging operations have broad exposure to defense, space, industrial automation, scientific research, marine systems and other specialized markets. Varex’s largest business is medical imaging. In its fiscal second quarter, Varex generated $156 million of its $216 million in revenue from its Medical segment, with the remaining $60 million coming from Industrial.

That mix gives Teledyne a larger base of healthcare-related revenue without moving far from the sensing and imaging technologies it already understands.

Teledyne is buying from a position of financial strength

The timing of the transaction also fits Teledyne’s recent financial trajectory. Less than three weeks before announcing the Varex deal, Teledyne reported the strongest quarterly orders, sales and operating profit in its history. Second-quarter revenue increased 9.8% to $1.66 billion, while non-GAAP diluted earnings rose 20.8% to $6.28 a share. Teledyne also generated $315.2 million of operating cash flow and $284.7 million of free cash flow during the quarter.

Management specifically pointed to the company’s balance sheet when discussing its ability to pursue acquisitions.

Teledyne’s consolidated leverage ratio fell to 1.1 times at the end of the second quarter after the company repaid $450 million of debt near the beginning of the period. Mehrabian said at the time that Teledyne was continuing to review acquisition opportunities because of the strength of the balance sheet. The Varex agreement follows directly on that statement.

Digital Imaging is already the biggest part of Teledyne. The segment generated $868.7 million in second-quarter sales, accounting for more than half of the company’s $1.66 billion of total revenue.

That makes the strategic logic different from an acquisition designed to diversify Teledyne away from its core operations. Varex would instead make the largest segment even larger while broadening the range of imaging technologies it can sell. Teledyne has used acquisitions repeatedly to build that model.

Its portfolio has expanded over the years through purchases of imaging, sensing, aerospace, marine and instrumentation businesses. Recent deals have included DD-Scientific, a maker of electrochemical gas sensors, and TransponderTech, a maritime communications and navigation technology business acquired from Saab.

The company’s largest transformational imaging acquisition remains FLIR Systems, which materially increased Teledyne’s exposure to thermal imaging and sensing. Varex is much smaller, but it follows the same broad playbook: acquire a technically specialized business serving markets Teledyne understands, then add its technologies to a larger portfolio of sensors and imaging systems.

Varex has solid demand but modest profitability

For Varex shareholders, Teledyne’s willingness to pay a 52% premium arrives at a time when the company has been showing stable demand without generating especially strong earnings.

Varex reported $216 million of fiscal second-quarter revenue, up 1% from a year earlier. Management said demand remained solid across both its Medical and Industrial businesses, supported by global CT systems, cargo inspection and photon-counting detectors.

Profitability was less impressive. Varex reported a GAAP net loss of 19 cents a share in the quarter, while non-GAAP earnings fell to 21 cents a share from 31 cents a year earlier. Non-GAAP gross margin declined to 34% from 36%. Operating cash flow was negative $2 million.

The company nevertheless expected revenue growth to improve in the second half of fiscal 2026. Its previous full-year guidance called for $860 million to $880 million of revenue and non-GAAP earnings of 80 cents to $1.00 a share.

Varex also refinanced its balance sheet in March, replacing $368 million of 7.875% senior secured notes due in 2027 with a new credit agreement that included a $350 million secured term loan, a $100 million revolving facility and a $40 million delayed-draw term facility. The new facilities mature in 2031.

Those financial characteristics help put the acquisition premium in context.

Teledyne is not buying a rapidly growing, high-margin software company. It is paying for a specialized industrial and medical technology platform with entrenched products, longstanding customer relationships and technical capabilities that Teledyne believes are difficult or unnecessary to reproduce internally.

The value may therefore depend less on accelerating Varex’s headline revenue growth and more on what Teledyne can do with the combined technology base.

The combined business could sell across more of an X-ray system

One of the attractions of the transaction is that Teledyne and Varex participate at different points inside imaging systems.

A medical or industrial X-ray system needs a source to generate X-rays, detectors to capture them, electronics to process the resulting signals and software to turn those signals into usable images or measurements.

Varex has substantial expertise in the X-ray source side through its tube business, as well as detector and processing technology. Teledyne brings its own detector technologies, imaging electronics and experience across other parts of the electromagnetic spectrum.

That creates opportunities for the combined company to offer customers a broader component portfolio without necessarily trying to sell complete medical scanners under its own name.

Varex primarily supplies original equipment manufacturers. Its customers incorporate Varex’s tubes, detectors and software into their own imaging platforms.

Teledyne follows a similar model in many of its businesses, selling highly engineered components and subsystems to companies that integrate them into larger products.

That similarity could matter operationally because Teledyne would not need to reinvent Varex’s route to market. Both companies already deal with sophisticated equipment manufacturers that purchase specialized components rather than mass-market finished products.

The customer overlap also creates potential cross-selling opportunities, though the companies have not yet quantified expected revenue synergies or cost savings publicly in the sources available for the transaction.

There are integration risks as well. Teledyne would be taking on a company with manufacturing sites across several countries, medical-market exposure and product lines subject to different regulatory, supply-chain and customer requirements from some of Teledyne’s existing businesses. Acquisitions also bring the usual risk that anticipated commercial benefits take longer to materialize than expected.

Teledyne’s recent balance-sheet position gives it more flexibility to absorb those challenges, but the price still requires management to produce adequate returns from the acquired assets.

The stock reaction leaves the focus on closing risk

For Varex investors, much of the acquisition premium appeared in the share price within hours.

At roughly $18.43 Monday afternoon, Varex was trading only about 2.5% below the $18.90 cash consideration.

That remaining spread is relatively small compared with the 52% premium embedded in the original offer.

The 52% figure measures how much Teledyne is offering compared with Varex’s unaffected share price before the acquisition was announced. The roughly 2.5% spread after Monday’s rally measures something different: the additional return available to an investor buying Varex after the announcement if the transaction closes at $18.90 as planned.

That smaller spread has to compensate investors for waiting until early 2027 and accepting the possibility that the transaction is delayed, renegotiated or fails.

Both boards have approved the merger, but Varex shareholders still have to vote on it and the companies must obtain the required regulatory approvals.

The limited product overlap cited by Teledyne may reduce some obvious competitive concerns, although regulators will make their own assessment of the transaction and the relevant imaging markets.

For Teledyne, the larger question extends beyond closing. The company is committing roughly $1.1 billion to expand a Digital Imaging segment that is already responsible for more than half of its quarterly sales. Varex gives it X-ray tubes, oncology-capable detectors, photon-counting technology and a much larger position in medical imaging, while Teledyne contributes a stronger balance sheet and a broader imaging platform.

The next formal steps are Varex shareholder approval and regulatory review, with the companies targeting completion of the acquisition in early 2027.

Sources

Teledyne Technologies: Second-quarter 2026 earnings release and Digital Imaging segment results.

Varex Imaging: Company information and fiscal second-quarter results.