Medtech Insight is part of the Business Intelligence Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

This copy is for your personal, non-commercial use. For high-quality copies or electronic reprints for distribution to colleagues or customers, please call +44 (0) 20 3377 3183

Printed By

UsernamePublicRestriction
UsernamePublicRestriction

MOUNTAIN MEDICAL TO BE ACQUIRED BY LIQUID OXYGEN FIRM CRYOGENICS ASSOCIATES

This article was originally published in The Gray Sheet

Executive Summary

MOUNTAIN MEDICAL TO BE ACQUIRED BY LIQUID OXYGEN FIRM CRYOGENICS ASSOCIATES under an agreement announced Feb. 25. Terms of the pact provide that Mountain Medical Equipment will become a wholly owned subsidiary of Bloomington, Minnesota-based Cryogenics, the medical products subsidiary of Minnesota Valley Engineering (MVE). CA and Mountain Medical have been evaluating the possibility of a business combination since December, when CA was enlisted to aid in the development of plans to increase operating efficiencies at Mountain Medical. The merger allows Mountain Medical to sustain long-term operations after more than a year of financial difficulties. The financial problems culminated in Mountain Medical closing its Littleton, Colorado production facility between Dec. 11, 1992 and Jan. 21 and furloughing 74 production employees in an attempt to conserve cash ("The Gray Sheet" Dec. 21, In Brief). The company subsequently recalled 55 of the furloughed workers and permanently eliminated 35 professional and clerical positions ("The Gray Sheet" Jan. 11, In Brief). For the nine months ended Dec. 31, Mountain Medical reported a net loss of $6.2 mil. on revenues of $11.4 mil., down 23% from the same period in 1991. In its quarterly report for the period, the firm notes that sales have been hurt by customer concerns over the company's viability. "Additionally, the company's liquidity problems have prevented it from offering competitive financing alternatives to its customers," the report states. The firm notes that after arranging a revolving loan agreement, "the company's relationships with its vendors...normalized and production...resumed, although future periods will continue to be affected by the 6-week suspension of production." Under the loan agreement, which was completed on Jan. 25, MVE will lend up to $1.25 mil., and Grumman Hill Investments, Mountain Medical's principal shareholder, will lend up to $750,000. The merger brings together two complimentary businesses: Mountain Medical's respiratory therapy equipment, such as oxygen concentrators, and CA's liquid oxygen systems for the home health care market. Mountain Medical's oxygen compressors come in 3 liter and 5 liter sizes. Its other products include compressor-driven and ultrasonic nebulizers. CA markets a portable 1.2 liter oxygen tank and reservoirs of 20, 30, or 45 liters from which the portable tank may be refilled. Mountain Medical states in its announcement of the merger that "together, the companies would be able to provide comprehensive sales, service and support to home care dealers." The two firms employ approximately one dozen direct sales representatives, with roughly two-thirds of those coming from Mountain Medical. Following the merger, all direct sales representatives will market technologies from both firms to U.S. home care providers. One sales representative will have responsibility for Canadian marketing efforts in addition to U.S. duties. Under the merger agreement, privately owned MVE will transform CA, its medical products division, into a new publicly held subsidiary. Immediately prior to the merger, MVE will transfer to CA the part of its oxygen tank business that is targeted at medical use, including a New Prague, Minnesota production facility. For the ten months ending Dec. 31, 1992, the medical oxygen tank business reported sales of $16.53 mil. and net income of $2 mil. In exchange for that business, CA will issue to MVE approximately 400,000 shares of preferred stock bearing aggregate, annual non-cumulative dividends of $9.5 mil., payable only out of available cash flow. The merger agreement provides that Mountain Medical stock will be converted into shares of CA common stock based on a 200-to-1 exchange ratio. Following the merger, shareholders previously owning Mountain Medical stock or rights to purchase that stock will own all of CA's common stock. The common stock will represent 16% of CA's total capitalization. The remaining 84% of the capitalization will be preferred stock, all of which will be held by MVE via its 400,000 shares. Although the merger is subject to approval of the Mountain Medical stockholders, Grumman Hill has executed an agreement with MVE to vote its shares in favor of the merger, ensuring approval of the deal. Following the merger, CA will remain headquartered in Bloomington and Mountain Medical will continue operations at its Colorado facilities.
Advertisement
Advertisement
UsernamePublicRestriction

Register

MT000302

Ask The Analyst

Please Note: You can also Click below Link for Ask the Analyst
Ask The Analyst

Your question has been successfully sent to the email address below and we will get back as soon as possible. my@email.address.

All fields are required.

Please make sure all fields are completed.

Please make sure you have filled out all fields

Please make sure you have filled out all fields

Please enter a valid e-mail address

Please enter a valid Phone Number

Ask your question to our analysts

Cancel