News Feature | June 17, 2015

Hill-Rom To Buy Welch Allyn For $2.05B

By Jof Enriquez,
Follow me on Twitter @jofenriq


Hill-Rom, a leading manufacturer of hospital beds, patient lifting systems, and surgical supplies, has announced that it will acquire Welch Allyn, a maker of diagnostic devices and vital signs monitoring equipment, for $2.05 billion in cash and stock. The deal diversifies Hill-Rom's portfolio to include point-of-care diagnostics, and it allows Welch Allyn to reach more geographic markets.

"Combining Hill-Rom's leading position in hospitals and operating rooms worldwide with Welch Allyn's leading position in point-of-care diagnostics and testing will expand both companies' ability to help healthcare providers focus on patient care solutions that improve clinical and economic outcomes," stated a Hill-Rom press release.

The product portfolios of the two medical technology companies have little overlap, which bodes well for both at a time when healthcare is becoming integrated across all settings, from acute care hospitals to physician offices and homes.

As Modern Healthcare notes, "Hill-Rom revenue is tied to hospitals' long-term capital-spending cycle for products such as beds, patient-handling equipment, furniture and stretchers. The life cycle for Welch Allyn's products — such as thermometers, blood pressure cuffs and other point-of-care diagnostic equipment — is much shorter and is therefore expected to provide the combined company with a more steady revenue stream."

Hill-Rom stated in its news release that the acquisition of Welch Allyn will reduce its reliance on traditional hospital clients, as the company expects large acute care capital equipment to account for less than one-third of its revenue after the merger. Hill-Rom expects the combined company to have $2.6 billion in revenues and to generate over $500 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

When the deal closes by the end of September 2015, the combined company will be headquartered in Chicago, but it will maintain a substantial presence in Skaneateles Fall, N.Y., where Welch Allyn is based. Hill-Rom stated that its purchase of Welch Allyn, whose brand will be retained, could serve as a springboard for future acquisitions as Hill-Rom continues to diversify.

"Welch Allyn provides with Hill-Rom with large, more diverse platforms that will enable more M&A opportunities in the future," Hill-Rom CEO John Greisch, who will head the new company, told Reuters after the deal was announced. He added that the acquisition "is the next step in our transformational journey. It adds products and services to enable us to have scale, depth and breadth to bring more value to our customers."

Hill-Rom's acquisition of Welch Allyn continues a trend of consolidation in the medtech industry, which is facing price pressure on products amid healthcare reimbursement cuts. More companies are joining forces to lower costs, to pool R&D resources, and to tap into the post-acute care and home-monitoring market — a promising growth area as populations age.