Bowing to vigorous antitrust opposition, Mediq, the largest renter of portable durable medical equipment to hospitals, has abandoned its bid for rival Universal Hospital Services, the second-largest equipment renter.
The $138 million acquisition of UHS, announced in February, would have given Mediq a virtual monopoly in the national market for leasing durable portable medical equipment, such as ventilators and intravenous drug pumps, the Federal Trade Commission alleged.
As a result, rental prices would have gone up, the FTC said.
Mediq, based in Pennsauken, N.J., had sales of $136 million in the year ended Sept. 30, 1996. It rents equipment to 5,000 hospitals and other healthcare facilities.
Bloomington, Minn.-based UHS posted sales of $60 million in the same period and had 3,100 hospital customers.
Last week Mediq surrendered. It was a surprising reversal from its repeated vows to fight the FTC, which sued the companies in August after a four-month antitrust investigation.
Mediq management underwent a change of heart when it became apparent that even if a preliminary injunction against the merger was avoided, a viable merger wasn't guaranteed, said Alan Einhorn, Mediq's general counsel.
The FTC made clear during pre-trial proceedings it would seek to block the deal administratively, even if the companies beat a preliminary injunction in court, Einhorn said.
Typically, the FTC seeks an order from federal court to bar a merger or acquisition pending the outcome of a separately filed administrative antitrust complaint.
On a fast track, the threatened administrative proceeding would have taken 13 months, Einhorn said, leaving a regulatory threat "hanging over us as we integrated the two companies." And if the FTC succeeded administratively, "then we'd have to unscramble the egg," Einhorn said.
As a result of the abandoned merger, Mediq said it will take a $3.5 million charge, or 8 cents per share for legal, financing and other associated costs.
The deal's death puts UHS back where it started late last year, when its board voted to put the company on the block to boost shareholder value. Mediq, however, was not UHS' sole suitor, said Thomas Minner, UHS president and chief executive officer. A lockout clause in the merger pact, preventing UHS and other bidders from discussing deals, is now gone. Rekindling interest among those unidentified companies is a possibility, Minner said. UHS' board will meet soon to review the options, he said.
The FTC's opposition should be only a temporary setback for UHS, according to Philip Putnam, an analyst with Brean Murray & Co, New York. "I think they'll be acquired by someone relatively soon," he said.