Officials for Cardinal Health said its too early to say how the companys plans to buy medical technology company Viasys Healthcare for $1.5 billion will affect its customers, but the deal could mean changes in contracts with group purchasing organizations and other customers down the line.
GPO contracts are something I know well look at very closely during the integration period, said Jim Mazzola, a spokesman for the Dublin, Ohio-based medical products and services company. He said its too soon to speculate whether the anticipated Viasys acquisition would bring additional savings to customers or whether the deal would prompt Cardinal to renegotiate GPO contracts immediately after the purchase or on a case-by-case basis as they come up for renewal.
But at least one GPO executive sees the acquisition as one that will net positive results for his member hospitals. I cant speak from a Wall Street perspective, but I feel bullish on this transaction in terms of how it will affect our hospitals, said Lee Perlman, president and chief executive officer of GNYHA Services, a GPO serving greater New York. Cardinal is a company our hospitals have a strong relationship with, so any expansion of their product lines is good for us.
The deal calls for Cardinal to acquire Conshohocken, Pa.-based Viasys for $1.5 billion in cash and assumed debt. The purchase agreement came just five weeks after Cardinal sold its Pharmaceutical Technologies and Services division to the Blackstone Group for $3.3 billion. Both moves were part of the companys ongoing efforts to fully develop a more narrowly focused healthcare product line.
The Viasys purchase, according to Cardinal officials and healthcare finance analysts, includes a number of products that complement existing Cardinal product lines, particularly in the area of respiratory care and treatment. Viasys does about $400 million annually in ventilator and respiratory diagnostic equipment sales while Cardinal earns about $250 million annually from sales of disposable respiratory equipment such as masks and tubing.
The purchase should also position Cardinal to expand more rapidly into foreign markets, according to a report from Robert Willoughby, a Bank of America analyst who follows the company.
Both Bank of America and Moodys Investors Service gave thumbs up to the Viasys acquisition, saying it should increase Cardinals earnings and stock value over the next two years. But Moodys warned that the sizable acquisition should temper any plans Cardinal has for additional acquisitions in the near future, particularly in light of ongoing efforts to repurchase up to $4.5 billion of its own outstanding shares of stock, and the recent establishment of a $600 million reserve to settle a class-action securities violation lawsuit (April 30, p. 16).
The Viasys purchase deal is expected to be completed this summer after regulatory clearance.
In a different area of business, Cardinal also announced late last week that it named Scott Storrer group president of healthcare supply chain services-pharmaceutical. Storrer, 40, replaces Mark Parrish, who was previously promoted to chief executive officer of healthcare supply chain services.