Still smarting from a failed bid to expand its equipment-leasing empire by acquisition, Mediq has agreed instead to be bought by a New York investment firm for $526 million.
As a result, Mediq would join Universal Hospital Services, the company it tried and failed to buy for $138 million last year, in being taken private.
Mediq's top management and name will remain the same despite the leveraged buyout, the company said. Now Mediq plans to focus on internal growth, paced by outsourcing and asset management services, as opposed to acquisitions, said Thomas Carroll, president and chief executive officer.
Equipment rental prices could rise if buyout costs in the form of higher debt payments are passed to hospital customers. But Carroll said the company has no plans to hike prices. Nevertheless, Standard & Poor's last week said Mediq's corporate credit and debt ratings could be downgraded due to anticipated buyout expenses.
Under terms of the deal, Pennsauken, N.J.-based Mediq would receive $14.50 per share from an affiliate of Bruckmann, Rosser, Sherrill & Co., which also would assume an undisclosed amount of company debt. Bruckmann emerged as the high bidder in an auction process that drew interest from about 50 companies, Carroll said.
Last August the Federal Trade Commission sued to block Mediq's proposed $138 million purchase of prime rival UHS, alleging the combination of the two top national renters of medical equipment to hospitals would be anti-competitive. Mediq initially planned to fight the FTC but later scrapped the deal.
Subsequently, UHS and then Mediq hired investment bankers to explore alternatives that would boost shareholder value, including selling the companies.
No. 2 renter UHS struck first with a $133 million sale to J.W. Childs Equity Partners, announced in November. The deal between Bloomington, Minn.-based UHS and Boston-based J.W. Childs is pending.
Mediq's agreement, subject to shareholder and government approval, is expected to be wrapped up this spring.
In a harbinger that a deal was approaching, Mediq recently cleared the legal decks with a $4.2 million settlement of false billing charges against a now-defunct subsidiary.