The merger of the nation's second- and third-largest distributors of medical and surgical supplies likely will undergo antitrust scrutiny, but the companies said they don't expect a challenge.
Owens & Minor will submit pre-merger notification documents to federal antitrust authorities this week for its proposed acquisition of Stuart Medical.
The deal, announced late last month, will create a company with estimated 1993 revenues of more than $2.2 billion. The number of healthcare facilities that the combined firm would serve wasn't available.
Under terms of the deal, Owens will buy Stuart for $40.2 million in cash and $115 million in stock. It also will refinance Stuart's $140 million in debt. Each share of Owens common stock will be switched for one share of stock in a new holding company created in the deal.
In 1992, Richmond, Va.-based Owens reported sales of $1.2 billion, and Greensburg, Pa.-based Stuart reported sales of $920 million. Stuart also is acquiring Indianapolis-based Midwest Hospital Supply Co., which has annual sales of about $50 million.
The transaction will shrink further an industry that has seen much consolidation in the past few years. National companies, such as Stuart, have consumed many smaller, regional firms in an effort to gain market share.
Prudential Securities estimates Stuart's market share in medical-surgical distribution at 10% in 1992 and Owens' at 13%. Market share for distributors is more difficult to track than manufacturers' market share, and thus, estimates aren't as reliable, industry observers said.
The deal probably won't topple the distributing industry's leader, Deerfield, Ill.-based Baxter International, an Owens executive said. In 1992, Prudential assigned Baxter a market share of 21%, but analysts said they believe Baxter has gained ground this year.
Early last year, Baxter was hoping to buy Stuart, but that acquisition fell through because of "cultural and financial issues" shortly after the Justice Department requested additional documents (March 1, 1993, p. 3). An antitrust ruling wasn't made on that deal.
Owens' acquisition of Stuart will give it overlapping distribution centers in six markets, said Glenn Dozier, Owens' senior vice president and chief financial officer. Those include Detroit; Los Angeles; Memphis, Tenn.; Phoenix, Ariz.; San Francisco; and Seattle.
The acquisition will let Owens serve hospitals in all states, Mr. Dozier said. It also will buttress the company's weaker presence in the Midwest and Northeast, regions in which Stuart does robust business.
"From the hospital side, (the acquisition) will be a concern to people because of its effect on competition," said William McFaul, president of McFaul & Lyons, a Trenton, N.J.-based healthcare consulting firm. "From an industry side, it makes sense. These are two very fine firms with the same objectives and goals."
G. Gilmer Minor III, Owens' president and chief executive officer, will retain those posts in the merged company. Richard Byington, Stuart's president and CEO, will join senior management in an unspecified position.
On Dec. 22, the day of the announcement, Owens' stock rose $1.38 to close at $20.50 on the New York Stock Exchange. Stuart is a privately held company.-