Maxxim Medical expects to become a stronger rival to Baxter International after it completes an acquisition of another sterile-procedure-tray company.
Such trays contain a variety of the products needed for specific procedures. Companies typically view them as a marketing tool for their manufactured products, while many hospitals feel the trays simplify inventory and save labor. Their production is about a $1 billion annual business.
Last week, Maxxim was expected to begin its $20-per-share tender offer for Sterile Concepts Holdings, Richmond, Va. Its original $16-per-share offer was rejected by the company in February. The deal is valued at $147 million, including the assumption of debt. It is subject to regulatory approval.
The consolidation of hospital buying under giant purchasing groups, most notably the new Premier, makes it essential for manufacturers to have significant capacity, said Peter Graham, executive vice president and chief operating officer of Maxxim. Without it, they won't be big enough to serve the groups.
Maxxim now has about 13% of the sterile-tray market, and Sterile has 19%. Baxter, which will spin off the business into a new company called Allegiance Corp. later this year, has more than 45% of the market, Graham said.
"Somebody needs to be a large enough No. 2 to be a viable competitor," he said. "While we were able to compete with Baxter before, it was more on a localized level."
Three smaller firms also make procedure trays. Because prices already are low, Graham said he doesn't expect further drops. "We're down to the point where it is very difficult to make a profit," he said.
Maxxim, based in Sugar Land, Texas, earned $2.9 million on revenues of $265.7 million in 1995. Sterile earned $8.2 million on revenues of $146.8 million. Unlike Maxxim, it doesn't manufacture products of its own.