Tokos Medical Plans Merger With Healthdyne : Health: Rivals took losses last year on care of high-risk pregnancies but now expect a turnaround.
Tokos Medical Corp. and its Marietta, Ga.-based archrival, Healthdyne Inc., said Tuesday they plan to merge later this year.
The similar companies, which both posted losses last year in the business of providing home care to women with high-risk pregnancies, hope to break into the black as a combined firm next year.
Assuming shareholders of both companies and federal regulators approve the deal, officials predict that cost savings achieved through staff cutbacks and other measures could make the combined company profitable. The new company, as yet unnamed, would have annual revenue of about $160 million.
Stockholders of Tokos and Healthdyne would receive one share in the new company in exchange for every share they now hold. Healthdyne stock jumped $1 a share, or 10.5%, to $10.50 on news of the merger Tuesday, while Tokos shares fell 75 cents, or 7.1%, to $9.875.
Stock analysts applauded the proposed deal. Analyst Howard Rosencrans, who has been hinting for three years that the two rivals ought to get together, said the merger should be “extremely bullish” for both companies. Rosencrans, who is with HD Brous & Co. in Great Neck, N.Y., said he was shocked that Tokos shares dropped on the news.
Analysts said that in recent years, Tokos faced declining sales to physicians--its prime customers--because studies questioned the effectiveness of the fetal monitoring equipment it uses to reduce pre-term deliveries. More recent studies have indicated, however, that the sort of monitoring devices that Tokos and Healthdyne use are effective, bolstering the companies’ hopes of increasing sales.
In addition, both companies in the last week have won approval from the federal Food and Drug Administration to market monitoring devices that they had been selling on a more limited “experimental” basis.
The companies said that Parker H. Petit, Healthdyne’s chairman and chief executive, would become chairman of the new company. Robert F. Byrnes, Tokos’ chairman and chief executive, would be president and chief executive officer.
Rosencrans speculated that executive egos had probably prevented the companies from coming together earlier.
Officials of both companies said severe pricing pressure drove them together. Last year, Tokos reported a loss of $5.9 million on sales of $100.7 million. Healthdyne’s maternity management unit, which will merge with Tokos, lost $1.2 million on sales of $66.4 million last year, company officials said. Healthdyne has spun off its clinical information services subsidiary, which became Healthdyne Technologies, a separate company. Overall, Healthdyne last year reported earnings of $16.4 million on sales of $152.4 million.
The merged company would maintain operations in both Santa Ana and Marietta. A transition team of executives is supposed to decide by January the location of the company’s new corporate headquarters.
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Medical Merger Healthdyne Inc. and Tokos Medical Corp. will join forces in the obstetrical field. The company, as yet unnamed, will continue to operate in both Marietta, Ga., and Santa Ana. Healthdyne Inc. Chairman and chief executive: Parker H. Petit Headquarters: Marietta, Ga. 1994 revenue: $152.4 million 1994 earnings: $16.2 million Employees: 1,057 Tuesday’s closing stock price: $10.50 a share, up $1 Tokos Medical Corp. Chairman and chief executive: Robert F. Byrnes Headquarters: Santa Ana 1994 sales: $100.7 million 1994 loss: $5.9 million Employees: 934 Tuesday’s closing stock price: $9.875 a share, down 75 cents *
Source: Individual companies; Researched by BARBARA MARSH / Los Angeles Times
