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Hill-Rom Holdings to acquire Welch Allyn for $2.05 billion

By Eric Reinhardt


SKANEATELES FALLS, N.Y. — Hill-Rom Holdings, Inc. (NYSE: HRC) has announced plans to acquire Welch Allyn Inc. for about $2.05 billion in cash and stock.


The firm’s boards of directors have “unanimously” approved the agreement, the company said in a joint news release distributed on Wednesday.


Hill-Rom, a medical-technology company, has corporate offices in Chicago, Illinois and Batesville, Indiana, according to its website.


It has about 8,000 employees worldwide, the news release said.


Headquartered in Skaneateles Falls, Welch Allyn is a manufacturer of medical-diagnostic equipment.


Privately held Welch Allyn employs more than 2,600 people in 26 different countries.


It has 1,300 employees in Central New York and estimated annual revenue of $700 million, according to CNYBJ Research.


Under the terms of the agreement, Welch Allyn shareholders will receive $1.625 billion in cash and about 8.1 million newly issued shares of Hill-Rom common stock.


The two companies have nearly two centuries of medical-device “innovation” between them, the firms said in the news release. They intend to combine their “strengths to develop new technologies that enhance outcomes for patients and their caregivers.”


Hill-Rom expects to complete the transaction before the end of September. At that time, Welch Allyn shareholders, a group that consists of about 75 shareholders, will own about 13 percent of the combined company.


No single Welch Allyn shareholder will own more than approximately 1 percent of Hill-Rom equity, according to the news release.



Leadership reaction

This “compelling combination” further positions Hill-Rom to play an increasingly important role in improving patient care, John Greisch, president and CEO of Hill-Rom, said in the news release.


“Hill-Rom has aggressively pursued external growth opportunities that leverage Hill-Rom’s existing channel strength to advance our strategic objectives of being a stronger, more diversified organization with the scale, resources and geographic reach to drive value across our business. This is a significant step in our transformational journey, and we are confident that our combination with Welch Allyn advances these objectives and will create a stronger platform from which to deliver significant value creation for our shareholders and other stakeholders,” said Greisch.


Through the acquisition of Welch Allyn, Hill-Rom expects to play an “even greater role in improving patient care globally and achieving greater levels of efficiency and reducing healthcare costs for its customers,” the firm said in the news release.


The transaction represents a “compelling opportunity” for Welch Allyn with the “right partner” in Hill-Rom, which appreciates the company’s history, strengths, and strategy, Steve Meyer, president and CEO of Welch Allyn, said in the news release.


“Combining with Hill-Rom will enable Welch Allyn to build on our important accomplishments over the last 100 years and play an even bigger role serving and meeting the evolving needs of patients and healthcare systems around the world. Hill-Rom and Welch Allyn share a commitment to patients and a history of delivering innovative solutions. Hill-Rom has the scale, geographic reach, experience and vision necessary to foster the next stage of growth and to ensure Welch Allyn’s continued success.”


Greisch will serve as president and CEO of the combined company.


Hill-Rom expects that “certain members” of Welch Allyn’s senior management will join the company.


The company will be headquartered in Chicago, Illinois, and expects to maintain a substantial presence in Skaneateles Falls and Tijuana, Mexico, where Welch Allyn has significant operations.


Hill-Rom is also “committed to preserving the strong Welch Allyn brand,” the company said in the news release.


Eric Allyn, co-chairman of the Welch Allyn board of directors, and a Welch Allyn founding family member, supports the transaction, according to the news release.


“The Welch Allyn shareholders so strongly believe in the power of this combination and its prospects for growth that we are taking a significant ownership stake in the combined enterprise. By becoming part of Hill-Rom, Welch Allyn can better compete in the industry and innovate in ways greater than ever before,” said Allyn.


Hill-Rom has obtained “committed” financing from Goldman Sachs Bank USA in connection with the transaction, the firm said.


Subject to market and other conditions, the company expects to finance the acquisition of Welch Allyn through a combination of equity issued to Welch Allyn shareholders and secured and senior unsecured debt, it added.


Goldman, Sachs & Co. is serving as financial advisor to Hill-Rom, and Chicago, Illinois–based Winston & Strawn is serving as its legal counsel, according to the news release. London, England–based Barclays (NYSE: BCS) is serving as financial advisor to Welch Allyn, and New York City–based Cravath, Swaine & Moore LLP is serving as its legal counsel.



Hill-Rom financial benefits

In the news release, Hill-Rom listed what it considered “financial benefits” of the upcoming transaction.


Hill-Rom expects the combined company will have $2.6 billion in revenues and generate more than $500 million in adjusted EBITDA.


EBITDA is short for earnings before interest, taxes, depreciation, and amortization.


Hill-Rom expects the acquisition of Welch Allyn will be “immediately accretive” to Hill-Rom’s adjusted gross and EBITDA margins, the company said.


Additionally, Hill-Rom expects the transaction to be more than 10 percent accretive to adjusted earnings per share in 2016 and “meaningfully more accretive thereafter.”


Hill-Rom anticipates that it will achieve annual run-rate cost savings of at least $40 million by 2018, “primarily through a combination of facility optimization, procurement efficiencies and general and administrative expense reductions,” the company said.


Contact Reinhardt at


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