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Cardinal close to completing Alaris buy

29-Jun-2004

Cardinal Health has completed its $2 billion (€1.6bn) tender offer for intravenous product and services firm Alaris Medical Systems in a deal that could give Alaris a leg-up that will allow it to leapfrog its competitors.

Alaris is one of the market leaders in intravenous drug delivery systems, including drug pumps that have software to help prevent medication errors. The link with healthcare giant Cardinal could now give it the muscle to compete with its much larger rivals in the sector, such as Baxter and Abbott Laboratories.

Despite repeated annual double-digit revenue growth and reported revenue of $533 million in 2003, Alaris is dwarfed by its competitors. This has made it tough to compete, as the bigger players have been able to offer products at lower cost and have a broader range, allowing them to offer hospitals bundle deals.

Alaris maintains that its technological innovation has kept it in the race. Adding in the capital strength of Cardinal will help it translate these advances into new products. Meanwhile, for Cardinal the deal broadens its products in the medical supplies area - and particularly in the medication safety area which is a strategic focus for the company - and further cements its position outside North America, and in Europe where it has been growing its business.

George Fotiades, Cardinal's president and chief operating officer, said: "Markets outside the US, especially Western Europe, represent a major growth opportunity for Cardinal Health." Alaris ranks number one or two in the 13 international markets in which it operates.

The acquisition of Alaris will complete once it is merged with Cardinal's Blue Merger subsidiary, said Cardinal noting that 99 per cent of Alaris shareholders had taken part in the offer.

Cardinal expects the deal to be modestly accretive in its fiscal year 2005 and meaningfully accretive by fiscal year 2007. The company expects to boost pretax profits by $80 million to $100 million by the end of 2007.

Patent dispute

Meanwhile, Alaris has been fending off a patent infringement lawsuit in the US, brought by ICU Medical , which alleges that Alaris' SmartSite and SmartSite Plus needle-free valves and systems are in breach of a patent owned by ICU. On 18 June a US District Court turned down a request for an injunction on the manufacture, use and sale of the products.

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