Philips acquires Respironics; Drive expands in Europe

Thursday, December 20, 2007

MURRYSVILLE, Pa. - - One of the HME industry's largest manufacturers changed hands last week, when Philips Electronics acquired Respironics for a whopping $5.1 billion.

"A core part of Philips' healthcare strategy is to achieve a leading position in the high growth sector of home healthcare," said Steve Rusckowski, CEO of Philips Healthcare and a member of the board of management of Philips Electronics. "This acquisition, with its significant strategic and financial benefits to Philips Healthcare, is another important step in carrying out this strategy."

A major player in the market for sleep disordered breathing products, Respironics generates about $1.2 billion annually and has shown a compounded annual growth rate of around 19%. Rusckowski said he expected Respironics to continue to show double-digit growth rates, adding that he also expected the company's core profit margin of around 15% to improve.

As far as acquisitions of HME manufacturers go, this ranks as perhaps the biggest ever and has set off tremors in some parts of the industry, with the big question being: Who's next? The thinking being that this could be the first of several large acquisitions of industry manufacturers over the coming year. Other potential players who might want to diversify their portfolios and enter the market include General Electric and Johnson & Johnson, say industry sources.

"Wall Street and venture capitalists tend to play follow the leader," said one source.

Philips--the world's biggest lighting maker, a top three hospital equipment maker and Europe's biggest consumer electronics producer--said it agreed to pay $66 per share in cash for Respironics, a 24% premium.

Respironics' board has agreed to the Philips offer. Shareholders must sign off on the deal, as well, the company said in a news release.

Upon closing, Respironics will become the headquarters for Philips Home Healthcare Solutions Group within Philips Healthcare. Respironics' senior management team is expected to remain with the organization and will continue to run the business. Philips has made a number of acquisitions in the area of home healthcare, including Lifeline Systems, Health Watch and Raytel Cardiac Services. Philips Home Healthcare Solutions supports almost one million at-risk seniors, either in their own homes or in senior living facilities throughout the United States and Canada.

During a November press conference, Respironics John Miclot stated that Respironics generates about $1.2 billion in annual revenue, has roughly $300 million in cash on hand and virtually no debt; it has met or exceeded Wall Street's estimates for seven straight years; and the company will spend $70 million this year on research and development.

"The combination of Respironics and Philips will allow us to continue to provide exceptional products and services to our customers and allow Respironics to expand its leadership in the global sleep and respiratory markets," Miclot said in a press release. "Philips is the right partner to create additional growth opportunities for our company, and we believe that our organization will benefit significantly by being part of a larger, growing and dynamic organization."

Drive acquires European maker of mobility products
PORT WASHINGTON, N.Y. - Drive Medical continued its push into the European market last week when it announced the acquisition of Medicare Technology Limited (d/b/a, Wheeltech; "Medicare"), a manufacturer and distributor of power mobility products, lift chairs, patient aids and bathroom safety products in Europe.

Medicare's principal facility is located in West Yorks, United Kingdom. From there it distributes its products throughout Europe, including all of the U.K., Germany, Austria, Belgium, Spain, Greece and other countries,

Drive Medical first entered the European market in December 2006 through its acquisition of Peter Endres, GmbH and Co. KG ("Endres"), a German manufacturer and distributor of bath lifts and mobility aids.

Drive CEO Harvey Diamond stated in a release: "The acquisition of Medicare, along with our previously completed acquisition of Endres, will provide Drive Medical with a substantial platform in Europe from which to launch new products, enter new markets and implement growth initiatives on an international scale. We intend to expand the product offering of Medicare by surrounding it with Drive's extensive product line and utilize Medicare's existing distribution channels in Europe to expand Drive's presence."