Cardinal Health to Acquire Medical Technology Leader VIASYS Healthcare for $1.5 Billion
DUBLIN, Ohio, and CONSHOHOCKEN, Penn.— Cardinal Health, a global provider of products and services that improve the safety and productivity of health care, and VIASYS Healthcare, a leading medical technology company, today announced a definitive agreement for Cardinal Health to acquire VIASYS for approximately $1.5 billion, including the assumption of outstanding debt.
Under the agreement, Cardinal Health will make a cash tender offer to acquire all outstanding shares of VIASYS common stock at a price of $42.75 per share.
With 2006 revenue of $610 million, VIASYS is a leader in respiratory care, developing and marketing systems for critical care and diagnostic use. VIASYS is also a leader in neurological, audio and vascular diagnostics, disposable medical products used in surgical procedures and enteral feeding, orthopedic implant manufacturing and clinical services.
The acquisition will expand Cardinal Health’s clinical and medical product offerings for global, acute-care customers and, combined with its complementary respiratory products business, will establish the company as a leader in the more than $4 billion respiratory care market.
The acquisition will also provide a range of complementary products to Cardinal Health’s medical disposables business and will leverage its integrated hospital selling organization in the U.S. Worldwide, VIASYS has more than 7,000 hospital customers in 100 countries and generates 40 percent of its revenue from customers outside the U.S., adding substantially to Cardinal Health’s international presence.
“VIASYS is a perfect strategic fit with our mission to help providers make health care safer and offers immediate revenue and earnings opportunities in key geographies worldwide,” said R. Kerry Clark, chief executive officer of Cardinal Health. “With a strong platform and excellent momentum in our Clinical and Medical Products businesses, we think the timing is ideal to broaden our offering. We have developed a process through our recent acquisitions – particularly Alaris – that will serve as a model for the rapid integration and realization of synergies with the VIASYS acquisition.”
With complementary product lines, operations and geographies, the acquisition will enable Cardinal Health to:
· Deliver comprehensive bedside, patient safety offerings to acute-care customers: VIASYS will expand Cardinal Health’s industry-leading product and service offerings that help customers address the most critical and costly areas of patient safety. This portfolio will include Alaris®, Pyxis® and CareFusionTM products to address medication errors and adverse drug events; MedMined® to target and reduce hospital-acquired infections; patented surgical drapes, gowns, gloves and instruments that help prevent surgical site infections; and now VIASYS’ Avea®, Vela®, PULMONETIC™ and SensorMedics® products to improve critical care and reduce ventilator-associated pneumonia.
· Better serve customers globally: With 40 percent of its revenue coming from customers outside the U.S., VIASYS also will advance Cardinal Health’s goal to grow in Western Europe and Asia. VIASYS has well-established relationships and market expertise through a direct sales force and a distributor network to support the growth of Cardinal Health’s clinical and medical products worldwide.
· Enhance its product and intellectual property portfolio: VIASYS has a commitment to innovation that has enabled it to grow faster than the industry by developing a pipeline of technologically superior products. By incorporating this technology into its patient bedside strategy, Cardinal Health can ultimately enable hospitals to better manage all forms of medication delivered, while collecting data on usage and outcomes to improve patient care.
The acquisition broadens Cardinal Health’s product offerings to diagnostics where VIASYS is a leading manufacturer of systems and supplies used to diagnose and monitor sleep, lung, vascular, auditory and brain disorders. Its leading brands include Jaeger®, Micro Medical™, SensorMedics®, Grason-Stadler® and Nicolet®.
· Realize synergies through existing capabilities and platforms: Synergies from the transaction are expected to reach $85 million to $100 million per year on a pretax basis by fiscal 2010. As a result, the transaction is expected to be accretive to earnings in fiscal 2009 and meaningfully accretive in fiscal 2010. With 20 percent of VIASYS revenue generated from the sale of disposable supplies, Cardinal Health sees immediate sales and cost-reduction opportunities through its complementary consumables business that already develops disposable components for VIASYS and other respiratory and anesthesia equipment manufacturers. Other synergies include international product sales opportunities through existing VIASYS dealers and direct customer relationships; manufacturing efficiencies; sourcing improvements; and efficiencies through Cardinal Health’s shared services organization.
“Our management team is excited about the tremendous potential for growth this acquisition brings us,” said Randy Thurman, chairman, president and chief executive officer of VIASYS Healthcare. “In addition to the exceptional product fit between our two companies, there is a strong cultural fit among our management teams, and our missions – to improve the safety of health care – are well-aligned. We are very focused on making this shared mission a success for global customers.”
Outlook, Share Repurchase Plan
Cardinal Health confirmed its outlook for the current fiscal year, with non-GAAP diluted earnings per share (EPS) from continuing operations expected to be $3.32 to $3.40. While the VIASYS acquisition is expected to have up to a $0.10 dilutive impact on non-GAAP EPS in fiscal 2008, Cardinal Health reiterated the range it previously provided of $3.95 to $4.15, including the impact of the VIASYS acquisition and use of proceeds from the sale of its Pharmaceutical Technologies and Services (PTS) segment to repurchase shares.
Consistent with Cardinal Health’s approach to acquisitions, VIASYS is expected to generate positive economic profit and returns above its cost of capital within the third year after the purchase.
Cardinal Health said there would be no changes to its current share repurchase plans. The company expects to complete the repurchase of $3.1 billion in shares with net proceeds from the PTS divestiture by the end of the first quarter of fiscal 2008, bringing repurchases since the beginning of fiscal 2007 to $4.1 billion. In addition, it does not expect the acquisition to alter its long-term repurchase plans, which it estimates will include up to an additional $1 billion repurchase of shares in fiscal 2008, subject to board approval.
Merger Agreement Overview
The merger agreement entered into by Cardinal Health and VIASYS Healthcare, which has been approved by both companies’ boards of directors, provides for Cardinal Health to acquire VIASYS in a two-step transaction. The first step will consist of a cash tender offer to be made by a wholly owned subsidiary of Cardinal Health for all outstanding shares of VIASYS common stock at a price of $42.75 per share in cash. If the tender offer is not completed within 45 days of the date of the merger agreement, the price per share will be increased by an amount equal to $0.007027 per day multiplied by the number of days between the 45th day of the date of the merger agreement and the date of first acceptance of VIASYS shares in the tender offer. In the second step, the tender offer will be followed by a merger in which the holders of the outstanding shares of VIASYS common stock not purchased in the tender offer will receive the same per share price paid in the tender offer, in cash, without interest. Upon completion of the merger, VIASYS will become a wholly owned subsidiary of Cardinal Health. The tender offer will be conditioned upon a majority of the outstanding shares of VIASYS common stock being tendered into the offer and will also be subject to regulatory clearances and other customary terms and conditions. The transaction is expected to be completed this summer.
Cardinal Health will host a conference call and audio webcast for investors, reporters and financial analysts at 9 a.m. eastern daylight time (EDT) to discuss the acquisition. Participants can access the call by dialing (617) 213-8068, passcode 78155933, or the webcast at the Investors page of www.cardinalhealth.com. A transcript and replay will be available at www.cardinalhealth.com.
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