Medical equipment maker Spacelabs, the third biggest patient monitoring venture behind General Electric and Philips, is buying Del Mar Reynolds (DMR), the cardiac division of Ferraris, for £14m.

As part of the deal there is a £1m plus or minus adjustment tied to performance and a £5m earn-out linked to 2007's sales.

Spacelabs, which is 80% owned by Nasdaq’s OSI Systems, is funding the deal through a line of senior credit, so dilution won’t darken the apparently-earnings-enhancing deal.

Considered non-core by Ferraris, DMR makes and sells ‘non-invasive’ cardiac monitoring systems and software, and also runs a ‘Core Lab’ business providing clinical trial services to pharmaceutical companies and clinical research organisations. Besides synergistic savings, chief executive Deepak Chopra says the acquisition’s cardiac monitoring systems can be marketed to hospitals alongside Spacelabs' products. The acquisition doubles the size and geographic presence of the clinical trials business.

Last year, DMR turned over £21.2m, from which it pumped out pre-tax profits of £1.8m. The acquisition is subject to a nod from Ferraris shareholders at an EGM towards the end of July.

Spacelabs debuted on AIM last October with a £16.4m placing at $2.20 (120p), giving it an initial valuation of £83m. First half figures to the end of December revealed an encouraging 50% profits rise to £2.3m, with half-time cash and cash equivalents standing at a healthy £6.5m. Forecasts in the market for the current year – excluding DMR as yet – suggest profits of £5.3m from £127m sales and analysts have set fair value for the shares at 241p. If you've invested in this tightly held stock, it is worth holding on for growth.