Asahi Kasei Corp. (3407), a Japanese maker of synthetic fibers and industrial chemicals, agreed to buy Zoll Medical Corp. for $2.2 billion to expand in critical-care products for hospitals and grow sales in Asia.
Asahi Kasei will pay $93 a share for Zoll, the Chelmsford, Massachusetts-based maker of devices used in ambulances and hospitals to revive patients whose hearts have stopped, the companies said in a statement today. That’s 24 percent higher than Zoll’s closing price of $75.10 on March 9.
Zoll’s devices expand the types of products sold by Asahi Kasei in both the U.S. and the “high-growth markets of Asia,” said Taketsugu Fujiwara, Asahi Kasei’s president, in a statement. Because the price doesn’t take into account Zoll’s temperature management system, used after strokes and heart attacks, others may still bid, said Jonathan Block, of SunTrust Robinson Humphrey Inc.
“There is a chance, albeit a slight one, that someone else could emerge over the next several weeks,” Block, a New York- based device analyst, said by telephone today. “It would have to be fast. This deal is set to close in the second quarter, which doesn’t leave a whole lot of time.”
Zoll didn’t run an auction process before the deal, according to a person with knowledge of the situation who declined to be identified because the talks were private. Instead, after Asahi’s initial offer, Zoll contacted parties that may have been interested in bidding before returning to the Japanese company for further negotiations, the person said.
Zoll jumped 24 percent to $92.94 at the close of New York trading, having more than doubled in the past 12 months. The deal was announced after markets in Tokyo closed, when Asahi Kasei rose 0.2 percent to close at 518 yen. The company’s stock has gained 12 percent this year
The acquisition won’t lead to restructuring, management changes or a smaller Zoll workforce, said Chief Executive Officer Richard Packer in a letter to employees today.
“Asahi Kasei needs all that Zoll has,” Packer wrote. “No part of Zoll or person in Zoll is redundant to what Asahi Kasei already has. This fact means there will be minimum change or disruption,” he said.
The acquisition would speed Asahi Kasei’s expansion of a health-care business that seeks to triple to 500 billion yen ($6.1 billion) by 2020. The global critical-care market is estimated at $48 billion and growing 7 percent a year.
“This transaction will allow us to build on Zoll (ZOLL)’s strong U.S. business position and its technology leadership, with Zoll forming the cornerstone of our critical care business,” Fujiwara said.
The price offered by Asahi Kasei is 26 percent higher than Zoll’s average closing price over the 20 days through March 9, and lower than the 53 percent average premium for 19 similar- sized acquisitions of health-care product companies in the past five years, according to data compiled by Bloomberg.
Zoll Medical, founded in 1980 by three people including heart doctor Paul M. Zoll, also sells a removable defibrillator vest used for patients at risk of cardiac arrest. The product, which had sales of $111 million in fiscal 2011, has strong potential for growth, Fujiwara said in a briefing in Tokyo.
Zoll’s net income rose 65 percent to $31 million in the year ended Oct. 2, driven by sales of external defibrillators, according to data compiled by Bloomberg. Annual sales have grown an average 16 percent for the past 10 years on demand in North America, said Yasuyuki Yoshida, an executive at Asahi Kasei.
Japanese technology companies are seeking health-care equipment businesses for growth. Sales in the world’s 10 biggest markets for medical devices are estimated to grow 6.8 percent a year between 2010 and 2015 to reach $228 billion, according to MarketsandMarkets, a marketing research firm based in Dallas.
Fujifilm Holdings Corp. (4901) agreed to buy SonoSite Inc. (SONO), a maker of portable ultrasound machines, for about $1 billion in December and proposed a partnership with Olympus Corp. (7733), the world’s biggest endoscope maker. Sony Corp. is considering an investment in Olympus, after the Tokyo-based company admitted to a $1.7 billion accounting fraud, according to the Nikkei newspaper.
Asahi Kasei will borrow to finance the acquisition and plans to secure more than 180 billion yen in syndicated loans, Koji Fujiwara, a director at the company, said after the press briefing in Tokyo. The loans will be arranged by UBS AG as early as next month, he said.
Asahi Kasei signed a partnership with Zoll Medical and began selling its automated external defibrillator in Japan in August. The partnership led to the acquisition announced today, Yoshida said.
UBS Investment Bank is advising Asahi Kasei and Brown Brothers Harriman is adviser to Zoll. Cleary Gottlieb Steen & Hamilton LLP is the legal counsel of Asahi Kasei and Goodwin Procter LLP is Zoll’s legal adviser.
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