San Diego-based CareFusion Corp. will acquire the Vital Signs division of GE Healthcare for $500 million.
The medical device maker plans to increase its respiratory care and anesthesiology business, scale up and build its international presence, as well as change its focus from being a distributor of specialty disposable medical products to one that develops them in-house, CareFusion CEO and Chairman Kieran Gallahue said in an investor call.
The acquisition is “well-aligned” to the company’s long-term growth strategy, Gallahue said.
“Health care is consolidating, making consolidation critical to remain competitive and to grow,” he said.
The Vital Signs division has annual revenue of $250 million, CareFusion said. It makes a variety of disposable products for surgery, such as masks and infusers, and patient-monitoring devices that measure temperature and vital signs. It employs more than 1,000 worldwide, with headquarters in Totowa, N.J., and a manufacturing plant in Shenzhen, China.
With the acquisition, the company will become the provider of more than 20,000 single-use respiratory and anesthesiology devices, CareFusion said.
Gallahue stressed the company’s priority on expanding internationally.
“With 80 percent of our revenues in the U.S., we have growth opportunities in the mature markets of Western Europe, as well as faster-developing markets in Latin America, the Middle East and in Asia,” he said.
CareFusion (NYSE: CFN) spun off from Dublin, Ohio-based Cardinal Health Inc. (NYSE: CAH) in 2009 and has since shown impressive growth — divesting itself of several of its business lines while adding others. The $8.2 billion market cap company employs about 15,000 around the globe, with customers in more than 120 countries. The Vital Signs acquisition is CareFusion’s largest and its eighth since 2010.
Most recently, CareFusion acquired the Spanish disposable infusion manufacturer Grupo Sendal SL, whose prime customer base is in Western Europe.
Notably, in 2011 it acquired German Rowa Automatisierungssysteme GmbH, a maker of automated pharmacy storage and dispensing systems, for $150 million. In 2010, it acquired Medegen Inc., a maker of needleless devices that can deliver intravenous fluids to patients, for $225 million, and it sold its international surgical products distribution segment to Mundelein, Ill.-based Medline Industries Inc. for $130 million.
Gallahue said buying Vital Signs is in line with the company’s previous acquisitions and ultimately will help the company broaden its international manufacturing and distribution channels.
“We have a good foundation for strong global growth,” he said.
However, the company posted lower first-quarter earnings in 2013 than in the previous year, bringing in $830 million in the quarter ended Sept. 30 versus $837 million in the like quarter of 2012. The slip in earnings occurred in its medical systems segment, reducing the impact from its fast-growing procedural solutions business, which accounted for about 37 percent of the company’s first-quarter revenue.
Gallahue said during a call with investors that with the Vital Signs acquisition, the procedural solutions arm will continue to be a priority.
CareFusion expects savings resulting from the acquisition of $10 million to $15 million on a pretax basis in “synergies” by fiscal 2017, the company said in a statement. The deal is expected to be complete in the U.S., China and certain other countries by Dec. 31, and the remainder will be finalized during the quarter ending March 31, 2014.
The company is in the midst of a three-year growth plan that involves further acquisitions and a $750 million share repurchase program.