Quinton Cardiology Systems, the Bothell-based company that makes devices to diagnose heart trouble, has agreed to join forces with another...
Quinton Cardiology Systems, the Bothell-based company that makes devices to diagnose heart trouble, has agreed to join forces with another small company, Cardiac Sciences of Irvine, Calif., to better compete with the global giants of medical devices.
The deal calls for a balanced re-organization of the two companies. The newly merged holding company will be called Cardiac Sciences and trade under the symbol DFIB on the Nasdaq. The company will sell cardiology products to hospitals and other customers under the established brand names Quinton, Burdick and Powerheart.
Quinton’s president and chief executive, John Hinson, will be in charge of the new company in those same roles, and Cardiac Sciences’ chief, Raymond Cohen, will be board chairman. The nine-member board of directors will be composed of five current Quinton directors and four current Cardiac Sciences directors. Existing shareholders of Cardiac Sciences will hold 51 percent of the common stock of the new company, and Quinton’s shareholders will have the rest.
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The corporate headquarters of the new company will stay at Quinton’s facility in Bothell, and manufacturing will be integrated at Quinton’s existing operation in Deerfield, Wis. Defibrillator development and some sales and marketing done by Cardiac Sciences will be concentrated at one facility in Lake Forest, Calif.
Hinson said about 6 percent to 8 percent of the work force will be cut through the merger, about 35 to 45 jobs, primarily from Cardiac Sciences. The combined company will have about 540 employees, he said.
Shareholders of Cardiac Sciences will receive 0.10 of a share of common stock in the new company in exchange for each of their current shares, while Quinton shareholders will get 0.77 of a share for each of their current shares. The transaction will unload all of Cardiac Sciences’ long-term debt, about $61 million, because its debt holders have agreed to accept $20 million in cash and $53.8 million in stock in the new company.
If revenues were pooled, the companies said they think they could reach 2005 revenues of $170 million to $180 million and could save $10 million a year in operating costs. The next year and beyond, they said, could bring double-digit percentage growth in revenues.
Quinton Cardiology Systems
Employees: 365 total, 100 in Bothell
CEO: John Hinson
What it does: Develops, makes and sells electrocardiographs, cardiac-stress-test systems, rehabilitation systems, Holter monitors.
Market value: $137 million as of Feb. 28
2004 revenue: $89.6 million
Headquarters: Irvine, Calif.
CEO: Raymond Cohen
What it does: Develops, makes and sells automated external defibrillators for sudden cardiac arrest.
Market value: $158 million as of Feb. 28
2004 Revenue: $68.5 million
Source: Company reports, Bloomberg News
Last year, Quinton had $89.6 million of revenue and ran $11 million in the black, when counting an unusual $9 million tax benefit.
Cardiac Sciences entered the merger talks with a weaker income statement, with $68.5 million in revenue and a net loss of $18.7 million for 2004.
Hinson said the new company will have greater international reach and broader product lines. Being larger will help in the competition against larger rivals such as Philips and Medtronic.
“We see an opportunity to create a much larger business,” Hinson said.
The deal is expected to be completed, pending regulatory approval, in the third quarter.
Luke Timmerman: 206-515-5644 or email@example.com