MEDICAL SUPPLIES: Tyco Buys U.S. Surgical
Tyco International, the Bermuda-based electronic security systems giant, will acquire U.S. Surgical Corp. in a $3.3 billion deal that is Tyco's "biggest push yet to become a major player in medical products," USA Today reports (Valdmanis, 5/26). The all-stock deal, which comes on the heels of Tyco's $1.77 billion acquisition of the Sherwood-Davis & Geck unit of American Home Products Corp. in January, "will make Tyco one of the world's largest providers of disposable medical products, with about $4.5 billion in annual revenue" in that division, the Wall Street Journal reports (Maremont/Kerber, 5/26). The New York Times reports that U.S. Surgical, which manufactures surgical staplers, sutures, disposable laparoscopic instruments and other electro-surgical products, boasted revenues of about $1.4 billion last year. "With this transaction, Tyco will have $4.5 billion in medical product sales, a solid presence in the operating room and a greatly expanded array of products for use throughout the hospital," said Tyco Chair and CEO L. Dennis Kozlowski (Holson, 5/26).
The Financial Times reports that the deal is another step forward in Tyco's plan to "shift its revenue base from North America." Tyco derives 40% of its revenue from outside North America, and has announced intentions to boost that amount to 60% over the next three years, "primarily through acquisitions." U.S. Surgical gleans about 48% of its revenue from outside the United States. "It (the proposed deal) provides greater geographical reach around the world, and significantly adds to the number of opportunities available to Tyco on which to build greater profitability and top line growth," Kozlowski said (Lewis, 5/26). The acquisition agreement, which is still pending approval by U.S. Surgical shareholders and federal regulators, offers U.S. Surgical shareholders 0.7606 Tyco shares for each U.S. Surgical share they own, "valuing the smaller company at $42.50 a share," the Journal reports (5/26).