Hill-Rom (NYSE:HRC) said today that it agreed to put up $300 million for Mortara Instrument and its line of diagnostic cardiology and patient monitoring devices, not including a $40 million “tax benefit” the company expects to gain by structuring the buyout a certain way.
Milwaukee-based Mortara makes an eponymous line of cardiac monitoring devices, plus the Quinton and Burdick brands it acquired from Opko’s Cardiac Science in 2013. The company, which employs more 400 workers, posted sales of $115 million last year, Chicago-based Hill-Rom said.
Mortara CEO Justin Mortara is slated to stay on as leader of his namesake instrument business, reporting to Hill-Rom front-line care president Alton Shader, according to Hill-Rom, which also released preliminary numbers for its fiscal 1st quarter.
“Our growing Welch Allyn franchise will be immediately strengthened by the addition of Mortara Instrument’s experienced team, breadth of diagnostic cardiology and patient monitoring offerings and best-in-class ability to integrate with electronic medical record systems,” Hill-Rom president & CEO John Greisch said in prepared remarks. “With Mortara, we will expand our diagnostic cardiology franchise in the acute care, clinical research and primary care settings, where we will use our global commercial presence to accelerate growth of the Mortara business. This transaction is aligned with our strategy to expand in our clinical focus areas, in this case patient diagnostics and monitoring, through the addition of complementary innovative solutions and enhanced customer offerings to deliver value for shareholders.”
“By combining with Hill-Rom, Mortara Instrument will have greater opportunities to grow as part of a global leader with strong brand equity and unparalleled care setting expertise,” Mortara added. “Hill-Rom and Mortara Instrument share similar patient-centric cultures, and I am confident that this combination will benefit our valued employees and customers. I look forward to working with the entire Hill-Rom team as we enter our next phase of success.”
Hill-Rom said it expects the deal, due to close during the 1st calendar quarter, to be “modestly accretive” to the bottom line during fiscal 2017, generating $10 million in synergies. The company also said it expects adjusted earnings on the low end of its 75¢ to 77¢ guidance for the fiscal 1st quarter ended Dec. 31, 2016, on a -4% sales slide to $637 million compared with Q1 2016.
Full-year adjusted EPS are still pegged at $3.74 to $3.82, the company said.
“Customer demand continues to be stable in the U.S., particularly in our patient support systems business, where we achieved both an increase in orders of 4% and an increase of 7% in our backlog versus the prior year,” Greisch said. “These factors contribute to our confidence in our ability to drive accelerated revenue and continued margin expansion, and generate adjusted earnings in-line with our previously-issued full-year guidance.”
Hill-Rom paid $2.05 billion for patient monitoring giant Welch Allyn back in September 2015.