GSI Group Inc. said its $82.5 million cash acquisition of NDS Surgical Imaging, a San Jose, Calif.-based producer of surgical and radiology displays, provides a substantial platform for the company's growth in the medical market and expands its portfolio of photonic technologies. "This is a significant acquisition for us. It's more than 25 percent of our market cap[italization] prior to the deal," GSI CEO John Roush said Tuesday in a conference call with investors. "From a strategic perspective, this deal is a major catalyst in our transformation of GSI." GSI provides laser-based products, precision motion and optical technologies to the industrial, medical, electronics and scientific markets. NDS' primary technology consists of high-resolution flat panel displays assembled into medical-grade enclosures, with proprietary customer-specific color-correction software algorithms. It operates primarily out of San Jose and has about 180 employees. "This is a business that Robert Buckley [GSI chief financial officer] and I have personally known of for some years," Roush said of NDS, adding that he, Buckley and a previous NDS CEO were all former colleagues at PerkinElmer. "In prior roles, I have sold photonic components into all of NDS' market segments, so I was definitely well aware of the great medical franchise and strong capabilities of NDS." GSI operates three business segments: Laser Products, which includes the units Synrad, JK Lasers and Continuum; Precision Motion, which includes the product lines of Cambridge Technology, MicroE and Westwind; and Specialty Technologies, which includes the companies General Scanning Thermal Printers, Photo Research and Semiconductor Systems. "We expect this business to be more predictable and less volatile than the company's traditional microelectronics exposure," Buckley told investors. "We intend to roll the NDS business into our Precision segment, which we will likely rename to put less emphasis on the term motion control, since this segment now contains virtually all of our medical business," Roush told investors. Given the acquisition, the company is also reviewing its existing businesses and evaluating possible changes to its segment reporting, he said. "This could possibly include the shift of our scanning business line into the laser products operating segment; however, no final decisions have been made," Roush said. He added that the transaction "takes us to a level where we expect our revenue base to be 95 percent OEM and 38 percent medical in 2013, on a pro forma basis. We set a medium-term goal to get to 40 percent medical, so this is a major step toward that goal. From a channel to market perspective, we now have an overall medical business on the order of $135 million in 2013." NDS was the first company to market surgical liquid crystal displays, LED backlights with backlight stabilization in a surgical display, color-correction technology and ultrawideband wireless technology in the surgical suite, among other innovations, GSI said. "The NDS color-correction algorithms are state of the art in the industry," Roush said. "The overall color characteristics of the display are custom-matched to the optical properties of each and every OEM. Then every pixel in the display is individually color-corrected one by one to ensure conformance with the overall requirements of the display for that OEM. In some cases the displays have real-time monitoring of the operating environment the display is seeing, and they adapt to that." Roush noted that GSI's photo research business "is the color measurement technology leader in spectral radiometers supplied into the high-end specialty display industry. "NDS currently uses our photo research analyzers in their R&D process, and our capabilities in this area will be quite beneficial going forward." The purchase price was financed using about $25 million in cash on hand, with the remainder from the company's new credit facility, GSI said. The acquisition, which closed Jan. 15, is earnings accretive and expected to add more than $80 million in revenue and nearly $12 million of adjusted EBITDA (the company's net income before deducting interest, income taxes, depreciation, amortization, noncash share-based compensation, restructuring, restatement, acquisition and other nonrecurring costs) to GSI's financial results in 2013. For more information, visit: www.gsig.com