Eastman Kodak Co. ( Rochester, NY ) plans to sell its health group to Onex Healthcare Holdings Inc., a subsidiary of Onex Corp. (Toronto), for up to $2.55 billion. Kodak's health group--which reported $2.54 billion in revenue for the 12 months ended September 30, 2006--is a provider of medical imaging and healthcare information technology solutions, including digital x-ray systems, molecular imaging systems and x-ray film, as well as dental imaging products, software, and services.
The deal includes $2.35 billion in cash at closing, plus up to $200 million in additional future payments if Onex achieves a specified return on the investment.
"We now plan to focus our attention on the significant digital growth opportunities within our businesses in consumer and professional imaging and graphic communications," said Antonio M. Perez, Kodak's chairman and CEO. "This sale maximizes shareholder value by obtaining a full and fair valuation for this business, and allows Kodak to increase its financial flexibility."
Kodak reports that it expects to use a sizeable portion of the proceeds to pay down its debt. It will announce additional plans at an analyst meeting scheduled for early February.
Analysts were not surprised by the sale of the troubled medical unit. The division traces its imaging roots back to 1896, shortly after the discovery of x-rays. Although once identified as a key component of Kodak's long-term growth strategy, the health group recently had been pegged as a financial underperformer. Although the unit accounted for about 20% of Kodak's overall revenues in 2005, profits plunged by more than 20% that year.
Onex's Le Blanc: An opportunity to grow.
Last May, Kodak engaged the services Goldman Sachs & Co. (New York) to explore alternatives for the company. The unit was finding it increasingly difficult to compete in the medical imaging market, which includes industry giants such as General Electric Co. (Fairfield, CT), Siemens AG (Munich), Royal Philips Electronics NV (Amsterdam), Toshiba (Tokyo), and Agfa-Gevaert (Mortsel, Belgium).
Perez called Onex an ideal acquirer of Kodak's health group. "They understand the health industry and are committed to growing the business for the benefit of customers and employees," he said. "I'm very pleased that we have such a favorable outcome for all of our constituents."
Kodak's Hobert: Growing together.
Robert M. Le Blanc, an Onex managing director, described the acquisition as "a great opportunity to acquire and grow a business that has established an impressive record in delivering innovative solutions to customers around the world." With $20 billion in annual revenues, Onex is one of the largest diversified companies in Canada.
"We are delighted to join Onex, a partner that shares our enthusiasm to grow our business," said Kevin J. Hobert, president of Kodak's health group. "This transaction creates an extraordinary opportunity for our global organization to meet the growing medical imaging and information needs of the healthcare community now and into the future."Onex plans to continue operations at the unit's manufacturing facility in Rochester, NY, and to retain the current workforce of 8100. The transaction is expected to close before June 30, 2007.
© 2007 Canon Communications LLCReturn to MX: Issues Update.