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Cardinal Health likes growth potential of Viasys NeuroCare Group

Madison, Wis. - In the first indication of how they view the Viasys Healthcare's NeuroCare Group, executives of Cardinal Health say they are excited about the growth potential of the Fitchburg-based organization.

As part of a merger agreement between Cardinal Health and Viasys Healthcare, Cardinal Health would acquire Viasys, parent of the NeuroCare Group, for $1.5 billion, pending approval from both companies' boards of directors.

In a conference call with investors, several top officials of Cardinal Health discussed Viasys and its various business units, including the NeuroCare group, which develops products for the monitoring of the brain, muscles, blood flow, hearing, and nerves.

Viasys chairman and CEO Randy Thurman said the company's management team is excited about the “tremendous potential for growth” the acquisition brings, and top Cardinal Health executives expressed similar optimism about the NeuroCare group. The group, located on Verona Road in Fitchburg, employs 200 people and reports $123 million in annual sales.

Dave Schlotterbeck, chief executive officer of clinical and medical products for Cardinal Health, noted that Viasys' respiratory care segment, its largest of four business units, provides the greatest synergies between the two companies.
However, he noted that the NeuroCare Group, the second largest segment, represents about 20 percent of the company's annual revenue. Not only does it develop products that monitor the brain, muscles, blood flow, hearing, and nerves - both in critical care and general clinical settings - its products frequently are used in the diagnosis of stroke.

“With the aging population, there is a lot of potential for growth in this space,” Schlotterbeck said.

Opportunity knocks

Cardinal Health, ranked 19th on the Fortune 500 list, reports $80 billion in annual revenue and employs more than 40,000 people worldwide.

The opportunity to acquire Viasys Healthcare first presented itself to Cardinal two weeks ago. Under the agreement, Cardinal Health, based in Dublin, Ohio, will make a cash tender offer of $42.75 per share to acquire all outstanding shares of Viasys stock.

Viasys, based in Conshohocken, Pa., is a global medical device manufacturer that Cardinal Health believes will enhance its international presence. In addition to respiratory and neurological care, Viasys has business units that specialize in audio and vascular diagnostics, disposable medical products used in surgical procedures, and orthopedic implant manufacturing and clinical services.

Viasys has more than 7,000 hospital customers in 100 countries, and generates 40 percent of its revenue from customers outside the U.S. Nearly 70 percent of Viasys' $610 million in annual revenue comes from its core respiratory segment, and Cardinal Health believes Viasys complements its existing respiratory disposables business, which generates about $250 million in annual sales.

Worldwide, the respiratory care market is about $4 billion. “When combined with Viasys' $400 million respiratory hardware business, we see excellent potential for growth in the U.S. and abroad,” Schlotterbeck said.

Synergistic sales

Cardinal Health CEO Kerry Clark predicted synergies of $85 million to $100 million per year from the transaction on a pretax basis by fiscal 2010. The company believes the synergies are achievable because it over-achieved on the upper end of the $80 million to $100 million range in synergies anticipated from its 2005 acquisition of Alaris Medical.

That was accomplished by developing a disciplined integration process that has been refined during the last several years.

Schlotterbeck said he met with Viasys' senior management team and came away impressed with both the product and cultural fit between the organizations. He said they have a similar focus on values and customer-driven innovation.

“These are experienced leaders that I expect to retain within Cardinal,” he said.

They won't include Lori Cross, who had served as president of the NeuroCare Group since 2003. Cross left the group, previously known as Nicolet Biomedical, after resigning in April. The group now is led by Edward Pulwer, who is based in the parent company's office.

Upon completion of the merger, which is expected during the summer, Viasys will become a wholly owned subsidiary of Cardinal Health.

The acquisition of Viasys is Cardinal Health's second transaction involving a Madison company since the start of 2007. In January, Cardinal reached a definitive agreement to sell its pharmaceutical technologies and services (PTS) segment, including the Middleton-based Gala Biotech, to the Blackstone Group for $3.3 billion.

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