Abbott to Buy Pancretec for $54 Million
Pancretec, a San Diego County-based medical equipment manufacturer that staged a remarkable comeback from the brink of financial ruin, will be acquired by Abbott Laboratories for $54 million, according to a tentative agreement announced by the companies Friday.
Abbott, a diversified health-care firm based in North Chicago, Ill., will pay $15 a share pending approval by Pancretec shareholders at a meeting scheduled tentatively for July. The $54 million includes Abbott’s purchase of outstanding preferred shares and assumes the exercise of Pancretec stock options and stock purchase warrants.
The merger is also contingent on a definitive agreement, a favorable vote by Abbott’s and Pancretec’s boards of directors and receipt by Pancretec of a favorable outside opinion as to the financial fairness of Abbott’s offer.
Rancho Bernardo-based Pancretec makes portable drug-infusion pumps used for outpatients’ medication. Buoyed by growth in the home health-care industry, Pancretec is agreeing to be acquired at a time when profits are climbing and its sales are growing at a nearly 100% annual rate.
For the fiscal year ended June 30, the company reported a $302,000 profit on sales of $6 million, up from a loss of $932,000 on sales of $2.9 million in 1987.
Abbott spokeswoman Cathy Babington said Pancretec’s advanced technology and strong market position are what attracted Abbott to the relatively small San Diego company.
“We also sell drug-infusion pumps, and, once the merger is complete, this will enhance our position,” she said, declining to specify how much of Abbott’s $4.9 billion in annual sales are derived from pump sales.
Pancretec’s strong sales and earnings growth have continued so far this year, with net income reaching $688,000 on sales of $4.5 million for the two quarters ended Dec. 31, up from a loss of $89,000 on sales of $2.4 million for the corresponding six months in 1987.
Pancretec’s performance was not always so sparkling. When the company hired Jim Yarter, a former C. R. Bard executive, as president in August, 1986, it was virtually out of cash and had a shareholder equity of negative $1 million. Its executive offices had become a revolving door: Yarter was the company’s third chief executive in seven months.
By increasing Pancretec’s sales staff, improving technology and focusing on the market for drug pumps supplied to AIDS victims, Yarter turned Pancretec around. The profits have boosted Pancretec’s stock price over the past 18 months from a low of $1.50 to Friday’s close of $13.625.
Largest Shareholder
Pancretec’s largest shareholder is Ventana Growth Fund, a San Diego venture capital firm headed by Duwaine Townsen, which held 14.5% of Pancretec’s common stock as of August. Ventana’s initial investment of $700,000 in 1986 is now worth more than $5 million if its holdings have not changed. Townsen was unavailable for comment Friday.
Yarter owned 91,040 shares of Pancretec as of August, a stake that would be worth more than $1.3 million at the per-share price offered by Abbott.
Pancretec employs 81 at its plant, none of whom will be laid off because of the merger, chief financial officer Joel Graff said Friday. Abbott employs 39,000.
