U.S. Representative John Katko said that the medical device tax was the reason for the merger.

Qmed Staff

Hill-Rom (Batesville, IN), the biggest maker of hospital beds in the United States, has announced that it will buy privately-owned  Welch Allyn (Skaneateles Falls, NY) for roughly $2.05 billion, enabling Hill-Rom to diversify its product portfolio by entering the point-of-care diagnostics business. Including everything from otoscopes and otoscope and ophthalmoscopes to blood pressure monitors, Welch Allyn's product line would give Hill-Rom an additional $800 million to $2.6 billion in annual revenue.

According to U.S. Representative John Katko, the device tax made it difficult for Welch Allyn--the largest medtech company in Katko's district--to compete in the free market, leaving it with no option but to agree to sell its business. He explains his viewpoint in the video below:

Hill-Rom expects the merger to be wrapped up by September 30, which is the end of the company's fiscal year.  

Hill-Rom, which also announced its plans to relocate its headquarters to Chicago, commented that it would preserve "a substantial presence" in Central New York--in Skaneateles Falls. It also said its intent to reduce its manufacturing and administrative costs by roughly $40 million.

The $2 billion deal will consist of a $1.6 billion cash payment with the remaining payment coming from 8 million shares of stock to Welch Allyn's owners.

The news sparked a range of reactions from the website Syracuse.com (Syracuse is located about 20 miles away from Skaneateles Falls, NY. One article decried the potential loss of a central New York-state institution and another arguing that the sale was fallout from the medical device tax.