8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

August 14, 2006

Ventana Medical Systems, Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-20931	94-2976937
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1910 E. Innovation Park Drive

Tucson, AZ 85755

(Address of principal executive offices, including zip code)

(520) 887-2155

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into Material Definitive Agreement

On August 14, 2006, Ventana Medical Systems, Inc., a Delaware corporation (“Ventana”) and Vision Systems Limited, a public limited liability company organized under the laws of Victoria, Australia (“Vision”) entered into a merger implementation agreement (the “Merger Implementation Agreement”) as announced in the press release attached hereto as Exhibit 99.1, which is incorporated herein by reference.

Pursuant to the terms and subject to the conditions set forth in the Merger Implementation Agreement, a wholly-owned subsidiary of Ventana will acquire all outstanding shares of Vision (the “Shares”) for A$2.13 per share and Vision will retire all its outstanding convertible promissory notes (the “Notes”), resulting in the Vision noteholders receiving A$2.73 plus accrued interest per note (collectively, the “Acquisition”). Each outstanding option to purchase securities of Vision will be exercised or cancelled prior to the completion of the transaction. The total price to be paid for the Acquisition (exclusive of costs) is approximately A$451 million in cash, or approximately US$346 million at current exchange rates. Upon the completion of the Acquisition, it is expected that Vision’s Managing Director, Jim Fox, will join Ventana’s Board of Directors.

The proposed acquisition of the Shares is to be implemented by a scheme of arrangement involving a wholly-owned acquisition subsidiary of Ventana, Vision and Vision’s shareholders (the “Share Scheme”) and the proposed cancellation of the Notes is to be implemented by a scheme of arrangement between Vision and its noteholders (the “Notes Scheme”). Each scheme is subject to separate review by the Supreme Court of Victoria (the “Court”) followed by separate meetings of the shareholders and the noteholders. The schemes must be approved (i) by a majority of shareholders and noteholders who attend their respective meetings in person, by representative or by proxy, and (ii) by 75% of the votes cast at each meeting. According to the Merger Implementation Agreement, meetings to vote on the Share Scheme and the Notes Scheme are expected to be held in late October 2006 and the parties are targeting the fourth quarter of 2006 for closing the Acquisition. If the requisite shareholder and noteholder approvals are obtained, the Share Scheme and the Notes Scheme will then need to be approved by the Court at a second Court hearing. If the Court approves each scheme at those hearings, the Share Scheme will be binding on all Vision shareholders and the Notes Scheme will be binding on all Vision noteholders.

The completion of the Acquisition is subject to various closing conditions, including, among other things, (i) obtaining the appropriate regulatory and Court approvals, (ii) approval of the Share Scheme and Notes Scheme by Vision’s shareholders and noteholders, respectively, (iii) an independent expert report that the Share Scheme and the Notes Scheme is in the best interests of Vision’s shareholders and noteholders, respectively, (iv) adherence by each party to certain operating covenants between execution of the Merger Implementation Agreement and closing of the Acquisition, (v) exercise or cancellation of outstanding Vision options, (vi) the absence of material adverse change in Vision’s business, and (vii) the accuracy of the representation and warranties of both parties. Completion of the Acquisition is not subject to a financing contingency. Merrill Lynch & Co. has provided the necessary financing commitments to complete the Acquisition.

The Merger Implementation Agreement may be terminated by either party, if the other party is in breach of a fundamental term of the agreement and after receiving notice, the breaching party fails to remedy the breach within a certain period of time. In addition, Vision may terminate the Merger Implementation Agreement if there exists a bona fide competing proposal that Vision’s Board of Directors reasonably determines, in good faith and consistent with its fiduciary and statutory duties, is more favorable to Vision’s shareholders than the Acquisition. Finally, the Merger Implementation Agreement will terminate automatically if Vision shareholders fail to approve the Acquisition, the parties are unable to secure Court approval for the shareholder meeting to approve the Share Scheme, or the Share Scheme is not approved by the Court by December 29, 2006.

Vision has agreed to pay Ventana a break-up fee (the “Break Fee”) equal to 1% of the equity value of Vision, which is approximately $A4.5 million, plus the goods and services tax, if another party acquires at least 90% of Vision’s outstanding shares within 12 months of the date that the competing proposal is publicly announced. The Break Fee is not payable to the extent that an Australian court or Australian regulators determine that Vision’s agreement to pay the Break Fee constitutes a breach of fiduciary or statutory duties, is unacceptable under the Australian Corporations Act of 2001, or would otherwise be unlawful.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press release issued by Ventana Medical Systems, Inc. dated August 14, 2006.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

VENTANA MEDICAL SYSTEMS, INC.
By:	/s/ Nicholas Malden
	Nicholas Malden
	Senior Vice President, Chief Financial Officer and Secretary

Date: August 14, 2006

EX-99.1

Exhibit 99.1

VENTANA MEDICAL SYSTEMS TO ACQUIRE VISION SYSTEMS LIMITED

FOR US$346 MILLION (A$451 MILLION)

Transaction Creates the Premier Global Supplier of Anatomical Pathology Solutions With One of the Broadest Product Offerings of Both Systems and Reagents for Clinical and Research Customers

Acquisition Anticipated to be Neutral to Ventana on an Adjusted EPS Basis in 2007

and Accretive Thereafter

Vision Systems Managing Director, Dr. James Fox, to Join Ventana’s Board of Directors

Upon Completion of Transaction

Tucson, Arizona, August 14, 2006 – Ventana Medical Systems, Inc. (NASDAQ: VMSI) and Vision Systems Limited (ASX: VSL) today announced that they have signed a Merger Implementation Agreement pursuant to which Ventana will acquire Australian based Vision Systems Limited, a leading developer and manufacturer of instruments and reagents for anatomical pathology and research laboratories worldwide. Under the agreement, Ventana will pay approximately US$346 million in cash (A$2.13 per share) for all the outstanding shares of Vision Systems and retirement of Vision Systems’ convertible debt. The merger agreement has been unanimously approved by the Boards of Directors of both companies.

The combination of Ventana and Vision Systems creates a leading global supplier of solutions spanning the anatomical pathology environment. Vision Systems’ revenues from continuing operations are estimated by analysts to be approximately US$80 million (A$106 million) for the fiscal year ended June 30, 2006, which represents approximately 27% of the estimated combined revenues of the two companies for the last twelve months ended June 30, 2006.

Founded in 1987 and headquartered in Melbourne, Australia, Vision Systems has operations in Australia, the United States and the United Kingdom and operates in two business segments: Vision BioSystems and Invetech. Vision BioSystems is a manufacturer and marketer of automated instruments including the Peloris^TM tissue processor and the Bond^TM-maX advanced staining system, as well as Novocastra^TM antibodies and biochemical reagents for biopsy-based detection of cancer and infectious diseases. Invetech, the core product development engine of Vision Systems, is also a provider of research and product development services to diagnostic and life science companies around the globe.

Christopher Gleeson, Ventana President and CEO, said, “The acquisition of Vision Systems is a transformational event for both companies. The combination of our respective instrument technologies and expansion of our reagent development and manufacturing capabilities are very complementary and together with an expanded sales and support infrastructure, the consolidated company has a unique platform for growth. In addition, we will be able to utilize Invetech’s core expertise to accelerate product development across the combined organization. The Ventana team looks forward to working with Vision Systems’ talented employees to achieve continued growth and long-term success in the marketplace by offering anatomical pathology and drug discovery laboratories truly superior product and support solutions on a global basis. We are also equally excited about having Jim Fox join our Board of Directors upon completion of the transaction. Jim brings a wealth of healthcare experience in all areas of R&D, operations and general management.”

“Bringing Vision Systems and Ventana together accelerates both companies’ strategic plans and creates a diagnostics leader with the product offering, infrastructure and financial resources to grow faster and create sustainable stakeholder value beyond what either company could achieve separately,” said Dr. James Fox, Managing Director of Vision Systems Limited. “We are excited about the strength of our combined global organizations and are confident we can achieve great things together.”

Strategic and Financial Benefits of the Transaction

The combined company is expected to:

• Expand Ventana’s advanced staining product offerings via Vision Systems’ extensive portfolio of Novocastra^TM antibodies and reagents as well as the complementary Bond^TM-maX staining system;

• Strengthen Ventana’s tissue preparation and primary staining value proposition with the addition of the Peloris^TM tissue processor and other complementary products;

• Improve Ventana’s global commercial infrastructure to better serve its customers;

• Accelerate Ventana’s product development and revenue growth through an expanded R&D and engineering organization; and

• Increase Ventana’s profitability through significant revenue and cost avoidance synergies by leveraging the Company’s combined sales, marketing and R&D infrastructure.

Excluding merger-related expenses, the transaction is expected to be neutral to Ventana’s non-GAAP adjusted EPS in 2007 and accretive thereafter (see Appendix A). The acquisition of Vision Systems is expected to help Ventana continue to enjoy attractive revenue growth and profitability over time.

Ventana’s outlook for 2006 remains unchanged excluding any transaction accounting impact. Ventana anticipates providing guidance for any transaction accounting impact and for 2007 in due course.

The transaction, which will be executed by way of a “Scheme of Arrangement,” is subject to regulatory, court, and Vision Systems Limited shareholder approvals, as well as other conditions. Closing is targeted for the fourth quarter of 2006.

Merrill Lynch & Co. is acting as financial advisor and Wilson Sonsini Goodrich & Rosati and Baker & McKenzie are acting as legal counsel to Ventana. Caliburn Partnership Pty Ltd is acting as financial advisor and Minter Ellison is acting as legal counsel to Vision Systems Limited. Merrill Lynch & Co. has provided a financing commitment to complete the acquisition.

Investor Conference Call

Ventana Medical Systems will hold a conference call to discuss this pending transaction at 8:45 a.m. Eastern on Monday, August 14, 2006. The call can be accessed live and will be available for replay over the Internet via: http://phx.corporate-ir.net/phoenix.zhtml?c=79080&p=irol-eventdetails&EventId=1368226. To participate, please dial 888-396-2384 or 617-847-8711 (international), passcode 42657507. For replay, please dial 888-286-8010 or 617-801-6888 (international), passcode 33697457.

About Ventana Medical Systems, Inc.

Ventana Medical Systems develops, manufactures, and markets instrument/reagent systems that automate slide preparation and staining in anatomical pathology and drug discovery laboratories worldwide. Ventana’s clinical systems are important tools used in the diagnosis and treatment of cancer and infectious diseases. Ventana’s drug discovery systems are used to accelerate the discovery of new drug targets and evaluate the safety of new drug compounds. Visit the Ventana Medical Systems, Inc., website at http://www.ventanamed.com.

Appendix A

Adjusted EPS is defined as GAAP EPS(1) excluding amounts related to the following:

• Effect of purchase price allocation on assets:

• Write-off of in-process research and development

• Amortization of identifiable intangibles

• Effect of write-up of assets to fair market value

• Merger-related costs

• Integration costs

• Restructuring charges

• Costs associated with Vision Systems Limited’s on-going litigation

• Other non-operating charges

(1) GAAP EPS cannot be estimated until after the closing of the transaction when an independent valuation of the assets acquired and liabilities assumed will be performed.

SAFE HARBOR STATEMENT

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Statements in this press release regarding our business that are not historical facts may be “forward-looking statements” that involve risks and uncertainties. Specifically, statements regarding our ability to serve clinical and research customers with broad product offerings and expectations regarding the impact of the merger on earnings per share, or EPS, calculations are forward-looking statements involving risks and uncertainties. Forward-looking statements are based on management’s current, preliminary expectations and are subject to numerous risks and uncertainties which may cause our actual results to differ materially from the statements contained herein. We may not realize anticipated future results, and new products may not be as successful as we expect in terms of customer rates of adoption. Other risks and uncertainties include risks associated with the development, manufacturing, marketing, and sale of medical products, competitive factors, general economic conditions, legal disputes, and government actions, and those other risks and uncertainties contained under the caption, “Factors Affecting Future Results,” in our most recent quarterly report on Form 10-Q for the quarter ending June 30, 2006, filed with the SEC on July 28, 2006, and available in the investor relations section of our website located at http://www.ventanamed.com and on the SEC’s website at http://www.sec.gov. We undertake no obligation following the date of this release to update or revise our forward-looking statements or to update the reasons actual results could differ materially from those anticipated in forward-looking statements. We caution you not place undue reliance upon any such forward-looking statements, which speak only as of the date such statements are made. Past performance is not indicative of future results. We cannot guarantee any future operating results, activity, performance, or achievement.

Contacts:

Ventana Medical Systems Christopher M. Gleeson President and CEO +1-520-229-3787 Nick Malden Chief Financial Officer +1-520-229-3857 Andy Brimmer / James Golden Joele Frank, Wilkinson Brimmer Katcher +1-212-355-4449 ext 121

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