Nellcor, the leading manufacturer of devices to monitor blood oxygen, will diversify with a proposed $475 million acquisition of Puritan-Bennett Corp.
Overland Park, Kan.-based Puritan-Bennett is a large maker of ventilators and oxygen systems, respiratory therapy devices that complement Nellcor's monitoring business. Both companies sell systems to diagnose sleep apnea.
Pleasanton, Calif.-based Nellcor announced last week its plan to acquire Puritan-Bennett in a stock swap valued at $475 million. Each Puritan-Bennett share will be exchanged for 0.88 of a Nellcor share. The deal, expected to close in September, requires approval from federal regulators and company shareholders.
Puritan-Bennett earned $8.4 million on revenues of $336 million in its fiscal year ended Jan. 31. Nellcor earned $20.5 million on revenues of $235 million in its fiscal year ended June 30, 1994.
Analysts said the acquisition will strengthen Nellcor's position in the market for home respiratory products and help it cut expenses. Both companies run operations near San Diego; Kansas City, Mo.; and Tijuana, Mexico.
Pressure to cut costs and broaden product lines has prompted dozens of mergers among hospital suppliers in the past few years.
Six months ago, Puritan-Bennett rejected as inadequate a $306 million acquisition bid from Thermo Electron Corp. That move angered some industry analysts and stockholders who felt the company should be performing better. After the Nellcor deal was announced, however, Puritan-Bennett shares rose $7.25, or 28%, to $33.38 per share in trading on the NASDAQ system. Nellcor shares dropped $1.63, or 4%, to $39.63 per share in NASDAQ trading, partly due to concern that the deal will slow its growth.