Eastman Kodak Company has announced the sale of its healthcare group to Toronto-based Onex Healthcare Holdings Inc. in a deal initially valued at $2.35 billion. Pending returns on investments, the total price could total as much as $2.55 billion.
Known for its CareStream picture archiving and communication system and radiology information systems, Rochester, N.Y.-based Kodak Health Group is a leading supplier of healthcare information technology products and services.
The acquisition will provide a significant boost to Onex Healthcare's operations, which include emergency care facilities and diagnostic imaging clinics. Onex Healthcare is a subsidiary of Onex Corp., a major buyout firm.
In a Jan. 10 webcast, Kodak Health Group President Kevin Hobert said that the group will retain its management but will not be called Kodak. The new group is expected to expand its relationship with the Center for Diagnostic Imaging, one of Onex's six current healthcare holdings.
Robert M. Le Blanc, a managing director for Onex, said that the acquisition will enable Onex Healthcare to reach its full potential. "Our investment dollars will go into developing new products," he said.
Both Hobert and Le Blanc stressed that Onex's current healthcare companies operate on the provider side of the industry. "This isn't a situation where you have a company that's in the same industry trying to rationalize a new portfolio," Hobert said.
Citing declines in earnings and digital sales, Kodak announced last May that it was interested in selling the health group.
"While the Health Group is enjoying strong organic growth in elements of its digital portfolio, such as digital capture solutions and healthcare information solutions, we have been observing for some time consolidation in this industry, said Antonio M. Perez, Kodak's chairman and chief executive officer said. "Given our valuable assets and the changing market landscape, we feel that now is the time to investigate strategic alternatives."
In a press release issued on Wednesday, Perez said, "We now plan to focus our attention on the significant digital growth opportunities within our business in consumer and professional imaging and graphic communications."
A release from Onex indicated that it's impressed by Kodak Health Group's medical, dental, molecular imaging and non-destructive testing products. "We recognize that growth is critical and that digital technology is the future," Le Blanc added.
The deal is expected to close in the first half of this year. The estimated 8,100 Health Group employees are expected to continue working for the group, companies said. "Our employees are going to have the same compensation and job titles, so by and large, this won't affect them," Hobert said.
Kodak's health group reported revenues of $2.54 billion for fiscal year 2006, which ended September 30. Proceeds from the transaction will be used to pay off $1.15 billion in secured debt. Other uses for the sale proceeds will be discussed at Kodak's annual investor meeting on February 8.