Zoll Medical Bought by Japanese Firm “Irasshai,” Zoll Medical Corp. Employees and

Zoll Medical Bought by Japanese Firm
“Irasshai,” Zoll Medical Corp.

Employees and executives of the Chelmsford, Mass.-based device manufacturer might hear that phrase (meaning Welcome!) much more frequently as their prospective new owner familiarizes itself with both the company and its potential to boost worldwide healthcare revenue.

Zoll’s new owner—diversified chemical maker Asahi Kasei Corp. of Tokyo, Japan—is prepared to pay handsomely for that potential, having offered the 32-year-old firm $2.2 billion for acquisition rights. The purchase price of $93 per share is 24 percent higher than Zoll’s closing price of $75.10 on March 9.
Announced on March 13, Asahi’s deal for Zoll is the year’s first big blockbuster purchase but the second in three months involving a Japanese company, reflecting a trend among Japanese firms to seek high-growth opportunities in the United States.

“It has been quite a while since Japanese companies were active acquirers of U.S. businesses, but many Japanese companies are now looking at healthcare as a future growth market,” financial analyst, investor and consultant Stephen Simpson wrote in a brief analysis of the Zoll-Asahi merger for Seeking Alpha, a website for stock market opinion and analysis. “Asahi Kasei may only be among the first in a long line of companies to look to build or enhance healthcare franchises around quality U.S. names. Should that prove to be the case, the next few years could be even more interesting for those smaller growth names.”

Simpson called the Zoll acquisition a “pretty strong deal” for the company. The price offered by Asahi Kasei is 26 percent higher than Zoll’s average closing price over 20 days through March 9, and lower than the 53 percent average premium for 19 similar-sized acquisitions of healthcare product firms during the past five years, according to Bloomberg data. Zoll’s net income soared 65 percent to $31 million for the year ended Oct. 2, 2011. Annual sales have grown an average of 16 percent for the last decade, Asahi executives claim.

Founded in 1980 by three people, including heart doctor Paul M. Zoll, the company manufactures and sells devices used in ambulances and hospitals to revive patients whose hearts have stopped. Its removable defibrillator vest generated $111 million in sales in fiscal 2011.

Asahi Kasei President Taketsugu Fujiwara said Zoll’s devices expand the kinds of products sold by his company in the United States and high-growth Asian markets.

“We are very excited to be joining forces with Zoll, with whom we have enjoyed a productive partnership over the past nine months. In the medical devices business, the U.S. market leads the world, not only in size and scope, but also in technological innovation, so establishing a strong infrastructure in the U.S. is an important step for Asahi Kasei. This transaction will allow us to build on Zoll’s strong U.S. business position and its technology leadership, with Zoll forming the cornerstone of our critical care business,” he said in a news release. “We look forward to working with the management and all the employees of Zoll to develop a critical care business renowned worldwide for its ability to turn technological advances into sophisticated medical tools that save lives and deliver invaluable improvements in the quality of life of patients and their families.”

Zoll CEO Richard Packer said he does not expect the deal to trigger a restructuring, management changes or layoffs. “Asahi Kasei needs all that Zoll has,” Packer wrote in a letter to employees. “No part of Zoll or person in Zoll is redundant to what Asahi Kasei already has. This fact means there will be minimum change or disruption.”

The acquisition, analysts claim, would accelerate Asahi Kasei’s plan to triple its healthcare business to approximately $6.1 billion by 2020. The global critical care market is estimated at $48 billion and growing at 7 percent annually. Asahi Kasei partnered with Zoll last August to sell its automated external defibrillator in Japan; that partnership led to the acquisition, though analysts claim there still may be time for another suitor to woo Zoll because the proposed purchase price does not include its temperature management system used after strokes and heart attacks.