Just weeks before sealing the deal on a $2.3 billion buyout by Asahi Kasei Corp. (TYO:3407), Zoll Medical successfully eased regulators’ concerns over its ties to a trio of countries deemed "state sponsors of terrorism" and subject to U.S. economic sanctions and export controls, regulatory filings show.
"The company does not have any subsidiaries, affiliates, offices, investments or employees in Iran, Sudan or Syria," Zoll told the securities watchdog, according to a filing. "The company has no assets in Iran, Sudan or Syria, and its only assets associated with these countries are a small amount of receivables with respect to sales into Iran."
The SEC was particularly interested in Zoll’s ties to that country, asking the company to detail "any agreements, commercial arrangements, or other contacts you have had with the government of Iran, or entities controlled by the Iranian government."
Zoll said its Iranian sales, which reached $3.9 million last year and topped $500,000 during the 1st quarter of 2012, were in line with U.S. trade programs designed "to ensure appropriate medical treatment for all people."
The inquiry was the result of a December 2010 New York Times article stating that Zoll had 13 licenses with respect to Iran, according to the SEC letter dated February 27, just weeks before Zoll announced a merger offer worth more than $2 billion from Japan’s Asahi Kasei.
The SEC asked Zoll to "address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company’s reputation and share value."
"Various state and municipal governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism," according to the agency.
Zoll filed its response early in March, citing regulations allowing device manufacturers to sell medical products to U.S.-sanctioned countries.
"All of the medical products that Zoll has sold into Iran are eligible for re-export to Iran under the Trade Sanctions Reform & Export Enhancement Act of 2000 ‘Ag/Med" program,’" Zoll wrote. "The company believes that the Ag/Med program serves to discourage a black market in medical technology and significantly reduces the risk that international trade laws will be violated."
Zoll products sold to Iran include professional external defibrillators, automatic external defibrillators, defibrillator accessories and replacement parts, disposable electrodes for defibrillators, automated chest compression devices, and accessories and replacement parts for automated chest compression devices, according to the filings. All products were sold through 2 independent, 3rd-party distributors which handle Zoll’s sales to Iranian hospitals.
The Chelmsford, Mass.-based company added that it does not have any employees or assets in Iran, nor any contracts with the Iranian government or state agencies. Zoll plans to continue selling products to Iran, according to the filings.
The SEC issued its last response March 20, stating that the agency had completed its review of the matter, about a month before Zoll sealed the deal with Asahi Kasei for $2.3 billion.
