Hill-Rom To Buy Privately-held Welch Allyn For About $2.05 Bln In Cash And Stock

(RTTNews) - Hill-Rom Holdings Inc. (HRC) said that it agreed to acquire privately-held Welch Allyn Inc. for about $2.05 billion in cash and stock.

As per the terms of the agreement, Welch Allyn shareholders will receive $1.625 billion in cash and about 8.1 million newly-issued shares of Hill-Rom common stock.

Upon the completion of the transaction, which the companies expect will occur before the end of September 2015, Welch Allyn shareholders, a group that consists of about 75 shareholders, will own approximately 13 percent of the combined company. No single Welch Allyn shareholder will own more than approximately one percent of Hill-Rom equity.

Hill-Rom expects the acquisition of Welch Allyn will be immediately accretive to Hill-Rom's adjusted gross and EBITDA margins. Additionally, Hill-Rom expects the transaction to be more than 10 percent accretive to adjusted earnings per share in 2016 and meaningfully more accretive thereafter.

Hill-Rom anticipates that it will achieve annual run-rate cost savings of at least $40 million by 2018, primarily through a combination of facility optimization, procurement efficiencies and general and administrative expense reductions.

Hill-Rom expects the strong cash flow generation of the combined company will allow it to deliver to below 3.5 times adjusted EBITDA by the end of fiscal 2017, compared to 4.5 times at closing.

The transaction is expected to close before the end of September 2015, subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. Following the execution of the merger agreement, Welch Allyn shareholders delivered a proxy representing at least the requisite vote required to approve the transaction.

John Greisch, President and CEO of Hill-Rom, will serve as President and CEO of the combined company. Hill-Rom expects that certain members of Welch Allyn's senior management will join the company.

Hill-Rom also reaffirmed its financial expectations for revenue and adjusted Earnings per Diluted Share for the third quarter of fiscal 2015, and cash flow for fiscal 2015, which were provided on May 5, 2015.

For the third quarter, Reported revenue growth is expected to be 13 to 15 percent; and Adjusted Earnings per Share is expected to be $0.58 to $0.61. Analysts polled by Thomson Reuters expect the company to report earnings of $0.61 per share and revenues of $453.50 million for the third-quarter. Analysts' estimates typically exclude special items.

Looking ahead for the full year fiscal 2015, the company expects reported revenue growth of 10 to 11 percent, adjusted Earnings per Share of $2.50 to $2.54. Wall Street currently is looking for fiscal year 2015 earnings of $2.53 per share on annual revenues of $1.87 billion.

These expectations exclude any potential impact of the acquisition.