Tokos Acquires Rival CareLink in Stock Swap
Tokos Medical Corp., the nation’s leading manufacturer and provider of in-home pregnancy monitors and services, said Friday that it has signed an agreement to take over competitor CareLink Corp. in Irvine in a stock swap valued at $40.2 million.
Craig Davenport, Tokos’ president, said his company will acquire all privately held CareLink’s shares in exchange for 1.2 million newly issued shares of Tokos stock.
The merger, which would make CareLink a wholly owned subsidiary, is expected to be completed by Aug. 31. The new shares represent about 8% of the total shares after the merger.
Davenport said he hoped the deal will solidify Tokos’ huge market share in the young, small industry. The company, which had sales last year of $115 million, currently enjoys a 70% market share. CareLink had 1991 sales of $10 million.
“This industry is really just beginning,” Davenport said. “This is significant for both companies.”
Davenport said that takeover negotiations have been going on “for some time.” The deal will give 7-year-old Tokos an inroad into Northern California and Nevada, where five of CareLink’s 20 offices are located.
Tokos, which has 100 offices nationwide, makes the Genesis Home Uterine Activity Monitor and provides in-home nursing services.
Like Tokos, CareLink also provides in-home uterine activity monitoring and nursing services for pregnant women who are considered at high risk of going into premature labor.
Davenport said that CareLink’s monitor, CareFone, has “some interesting technology” that Tokos would inherit in the deal.
Tokos would also inherit “substantial” losses suffered recently by CareLink. Davenport declined to disclose the amount or the nature of the losses until the deal is completed. He said that CareLink’s losses will be charged off on Tokos’ first two quarters, creating losses. Nevertheless, he expects the combined entity to post an annual profit.
Tokos has had its share of troubles.
Despite FDA approvals of the monitoring unit, the American College of Obstetrics and Gynecology and the New England Journal of Medicine have criticized the product’s technology and effectiveness in the last year.
Tokos stock has faltered from its high of $46 a share in December. It closed Friday on the over-the-counter trading at $33.50 a share, unchanged for the day.
Further, about 20 of the nation’s largest insurers refuse to pay for the cost of the monitor and nursing services. Bills can reach $40,000 in some severe cases.
Despite its troubles, Tokos still receives payments from more than 50 other insurance companies and has survived financially as acceptance to the monitor has grown.
Earnings for the first quarter reached a record $4 million. But Davenport said that record will likely be wiped out from the charge-offs for acquisition costs.
