Invacare to acquire Suburban Ostomy Supply for 1.4 times revenue

Weekly Corporate Growth Report, Dec 22, 1997

The Deal: Invacare has agreed to acquire Suburban Ostomy Supply for $135 million, or $11.75/ share. Invacare's offer is contingent upon a valid tender of at least two-thirds of the outstanding shares of Suburban on a fully diluted basis, among other conditions. After consummation of the tender offer, Invacare will acquire, pursuant to the merger, any remaining outstanding shares of Suburban for the same share price. The deal will likely be accounted for as a pooling of interests. Suburban will be a core strategic business to Invacare and will be run as a separate operating group by its current management team. On the news, Suburban shares rose 71.875 cents, or 6.6%, to $11.59375/ share, while Invacare fell 9.375 cents to $22.25/share.

Discussion: The deal will offer significant opportunities for the enhancement of sales growth in an increasingly competitive environment Invacare's industry-leading One Stop Shopping strategy will be greatly complemented by Suburban Ostomy. Invacare will be able to further serve the dealer/provider channel through Suburban s disposable medical supplies, which can provide as much as 20% of dealer/ provider revenues. The new company will be able to leverage customer relationships by combining Invacare's field sales and Suburban's inside sales organizations.

The combination will create an organization capable of lowering its customers' operating costs and increasing its cash flow amid a rapidly evolving health care environment that demands increased efficiency. It is anticipated that the deal will result in combined revenues exceeding $860 million with a neutral effect on earnings in 1998.