Alex, I found this one which is old (Nov 17). But it illustrates the concerns the analysts had for the merger. Though we know it passed FTC, the street doesn't seem to buy it whole-heartedly.
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Mergers & Restructuring
Nov 17, 1997
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Antitrust Thorns Seen for Respironics Deal:Will Issues Be
Significant
Enough, though, to Puncture Combination?
Full Text
By Judy Radler Cohen As Respironics, Inc.'s newly minted
deal for Healthdyne Technologies, Inc. traded at a 22% spread,
sources unanonymously expected the $370 million stock swap to receive a second request.
Indeed, the $4.31 spread at presstime represented an
annualized net return of 61%, figuring an April 15 close, an arb pointed out. And that time frame is generous, considering Pittsburgh-based Respironics anticipates closing the deal during the first quarter of next year.
The deal, coming three months after Invacare Corp. ended its hostile $15- per-share offer, exchanges each Healthdyne share for $24
worth of Respironics stock. When the transaction was announced last
Tuesday, Healthdyne closed down slightly to $19.75 on trading in
excess of two million shares, compared to the previous day's fewer than 100,000 shares. At presstime, Atlanta-based Healthdyne closed at nearly $19.69.
"It's not a slam dunk that this will avoid all the Hart-
Scott-Rodino issues," said Jeff Barnes, an analyst at BancAmerica
Robertson Stephens.
At issue are the combined companies' 62% share of the $200
million non-invasive/portable ventilator market and their combined
58% share of the $250 million global therapeutic sleep apnea market. And if non-invasive ventilators are placed in a separate category, the combined entity will control 88% of the $95 million portion that segment generates in revenue annually.
Respironics General Counsel Steve Fulton, who noted the
company's awareness of the Street's reaction, said, "We don't believe there will be an antitrust concern." Respironics did not retain outside counsel for the deal beyond its usual law firm of Reed Smith Shaw & McClay, he said.
Indeed when asked if Respironics had determined how much
divesting would be too much, if it was required to sell assets, Fulton
responded, "We don't foresee the need for any divestitures . . . any at all." Herriot Tabuteau, an analyst at NationsBanc Montgomery Securities, said he did not anticipate the therapeutic sleep apnea market, for example, would prove to be the sticking point. Despite a combined Healthdyne/Respironics controlling more than half the market, there are too many other players, he commented. Those companies include ResMed Inc. and Sunrise Medical Inc., with its Respiratory Products Division. After the deal announcement, Montgomery
reaffirmed its buy rating on Healthdyne.
"I'm not saying it'll sail right through," Tabuteau said,
"But it's not like those guys will be the 1,000-pound gorilla." Robert
Valdez, Healthdyne's lead banker at Cowen & Co., said the two
parties had carefully assessed the antitrust situation and determined it did not pose a significant obstacle.
Healthdyne had said, on July 23, it had received a strong
expression of interest from a Fortune 500 company. Valdez said that
company was not Respironics. He declined to elaborate.
And as far as Invacare re-emerging with a competing offer
should antitrust problems crystallize, a source close to Invacare said, "I think they'd publicly stated that they were kind of moving on." Still, he noted, if the deal had been priced at $16.50 per share, "the lines would be buzzing," he said.
Invacare's lead banker at Salomon Brothers, Wilder Fulford,
did not return a call seeking comment. |
