London-Based Smiths Group to Buy Medex
Smiths Group, which makes insulin pumps for hospitals and anthrax-detection systems for the U.S. Postal Service, agreed to pay $625 million for Medex Inc., a privately held medical equipment manufacturer in Carlsbad, Calif., the two firms said Monday.
The acquisition includes the assumption of $300 million in Medex’s debt, Smiths and Medex said. Smiths is buying the maker of anesthesia devices from One Equity Partners, an affiliate of J.P. Morgan Chase & Co. that owns 83% of the company. The remainder is held by management and employees.
Medex specializes in intravenous catheters and is forecast to report sales this year of $330 million and earnings before interest and taxes of $100 million, the companies said. Combined annual sales in medical devices after the purchase would be about $1.25 billion.
Medex has about 2,000 workers, including 1,100 in the U.S. Smiths declined to comment on any plans to eliminate jobs after the purchase is complete. London-based Smiths has been disposing of slower-growing units to focus on aerospace, medical devices and detection equipment.
“This purchase puts us among the top 20 companies worldwide in medical devices,” Chief Executive Keith Butler-Wheelhouse said on a conference call with journalists. “It continues our strategy over the last two years of rebalancing the group.”
The purchase will immediately boost earnings on completion, Butler-Wheelhouse said. The transaction will increase earnings before interest and taxes at Smiths’ medical division by about 45 million pounds ($87.2 million) and sales by a third to about 634 million pounds ($1.2 billion), the company said.
“There are a lot of complementary products between the two businesses, 21 factory locations, separate sales forces and overlapping computer and back-office functions,” Butler-Wheelhouse said.
Medex “looks like a decent fit with Smiths,” said Andrew Gollan, an analyst at Numis Securities, who raised his rating on the stock to “add” from a “hold” recommendation. The worldwide medical-equipment market is growing 5% to 6% a year, Gollan said in a note to investors.
