Owens & Minor to Buy Halyard Health’s Surgical & Infection Prevention Business for $710M

Owens & Minor announced that it has signed a definitive agreement to acquire the surgical and infection prevention (“S&IP”) business of Halyard Health Inc. for approximately $710 million in cash. The highly complementary business will increase scale and profitability across Owens & Minor’s global business, while also enhancing the company’s owned-brand product portfolio and expanding the company’s global network into new markets and channels.
 
Halyard’s S&IP business is a leading global provider of medical supplies and solutions for the prevention of healthcare-associated infections across acute care and non-acute care markets. S&IP’s focused portfolio of surgical and infection prevention offerings, which includes sterilization wraps, surgical drapes and gowns, facial protection, protective apparel and medical exam gloves, is highly regarded in the industry. Recognized S&IP brands include surgical drape products such as AEROBLUE and AEROCHROME; exam gloves including PURPLE, LAVENDER and STERLING; and sterilization wrap such as ONE-STEP, QUICK CHECK and SMART-FOLD. As a market leader with a differentiated product portfolio and strong brand recognition, S&IP brings an experienced global sales force with direct channel access to both acute care and non-acute care markets throughout the world. Additionally, S&IP brings a world-class manufacturing network, a strong pipeline of new products, and a successful track record of bringing products to the global market.
 
“Halyard’s S&IP business is a market leader in the prevention of healthcare-associated infections, and its portfolio of products and services is highly complementary to the innovative solutions we currently provide to our customers,” said P. Cody Phipps, Chairman, president, and CEO of Owens & Minor. “In today’s rapidly changing healthcare industry, Owens & Minor is taking aggressive steps to strengthen and diversify our business model, and this transaction supports and enhances our ability to execute our strategy and provides significant opportunities for growth.”
 
“This transaction is both strategically and financially compelling,” said Richard Meier, EVP, CFO, and president-international. “It will allow us to enhance our product offerings to our acute care and non-acute care customers in a wider range of global markets and—combined with our recent acquisition of Byram Healthcare—will position us to achieve sustainable, profitable growth.”
 
Strategically and Financially Compelling Transaction

• Expands opportunities for Owens & Minor’s owned-brand product portfolio—S&IP’s differentiated product portfolio, which holds leading U.S. market positions and has strong brand recognition across developed markets, complements Owens & Minor’s existing portfolio of brands and is expected to drive growth in revenue, operating earnings, earnings per share and cash flow.
• Accelerates Owens & Minor’s strategy to deliver value at the point of care—The transaction complements Owens & Minor’s business model with expanded solutions and trusted products at the point of care in the acute care and non-acute care markets.
• Creates a platform for future growth—The acquisition allows Owens & Minor to respond more quickly to a changing healthcare industry, with a focus on new opportunities for unique product solutions and value-enhancing bundles and expansion into more clinically relevant areas. The transaction also adds new skill sets, resources, and capabilities to support growth initiatives.

 
With the S&IP transaction, Owens & Minor expects to acquire approximately $1 billion in revenues and approximately $80 million of annual EBITDA. Additionally, Owens & Minor expects annual pre-tax synergies to reach approximately $40 million by year three post-closing. Owens & Minor intends to finance the transaction with a combination of cash and debt, and has obtained committed financing, subject to customary closing conditions, from BofA Merrill Lynch in connection with the planned acquisition. Owens & Minor expects the transaction to be accretive to non-GAAP diluted earnings per share in 2018, with increasing accretion thereafter. The transaction, which has been approved by the boards of directors of both companies, is expected to close in the first quarter of 2018, subject to customary closing conditions and regulatory approvals, including Hart-Scott-Rodino.
 
BofA Merrill Lynch and Lazard acted as lead financial advisors to Owens & Minor. Citigroup also provided advice to Owens & Minor. Simpson Thacher & Bartlett, LLP acted as lead legal counsel to Owens & Minor; while Hyman, Phelps & McNamara, P.C. provided advisory services on regulatory matters; and Eversheds Sutherland provided advisory services on international legal matters.