Sunrise Medical Accepts Deal for $224.4-Million Buyout
Sunrise Medical Inc., a maker of crutches, wheelchairs and other medical devices, agreed Tuesday to be acquired by an investor group that includes Chief Executive Michael Hammes and other senior managers in a transaction that values the Carlsbad-based company at about $224.4 million.
The acquisition deal marks the latest chapter in Sunrise’s saga to turn itself around. Since the mid-1990s, a combination of factors, including a financial accounting scandal and changes in the medical equipment marketplace, has been a drag on the company’s stock price and earnings.
The group would pay $10 a share in cash for each share outstanding of Sunrise, 55% above Monday’s closing price of $6.44. The company had about 22.4 million shares outstanding on June 30.
Sunrise Medical makes and sells wheelchairs, respiratory products, walkers and crutches, beds and other products used by home health-care providers and nursing homes. The investor group also includes Park Avenue Equity Partners and Vestar Capital Partners, both of which say they specialize in management-led buyouts.
The transaction will allow management to pay “more attention to running the business,” Hammes said. After the transaction, Sunrise will become a closely held company.
He also said a “price level of $10 is very good for the shareholders.” Sunrise stock peaked in 1995 at $37 and has been in a downward spiral ever since, trading in the $5-to-$7 range for more than a year. After the deal was announced Tuesday, shares rose $2.69 to close at $9.13 on the New York Stock Exchange.
Hammes took the helm at Sunrise last year, after company founder Richard Chandler stepped down to make way for other managers to take control. Hammes was a Sunrise director. Chandler formed Sunrise in 1983 and built it into a $600-million company.
The company was forced to restate earnings for 1993, 1994 and 1995 after disclosures that one of its divisions had misstated earnings. A series of layoffs and corporate restructuring followed, some manufacturing moved overseas to contain costs.
The financial improprieties have long since been cleaned up but the company was slow to respond to changes in the marketplace.
For its fiscal year 2000 ended June 30, Sunrise posted profit of $4.1 million, or 19 cents per share, compared with profit of $4.5 million, or 20 cents, the previous year.
Revenue remained flat at $644.5 million. Sales of wheelchairs were 43% of that total. Sales of walkers, crutches, and other personal-care products were 23%.
About 19% of the company’s 2000 revenue came from respiratory products such as oxygen concentrators used by patients suffering from chronic lung diseases, and about 12% came from nursing home beds and bathing systems. Sales of speech devices for those with speech disorders were about 3% of revenue.
Bankers Trust Co., a unit of Deutsche Bank, will provide $215 million in bank debt and $40 million in subordinated debt financing to fund the acquisition, refinance existing debt and for general purposes. Park Avenue and Vestar affiliates will provide other funds needed to complete the transaction.
