TOKYO (Reuters) - Japan's Asahi Kasei Corp will buy U.S. medical equipment maker Zoll Medical Corp for $2.21 billion as it looks to build a globally competitive healthcare business and reduce its reliance on its chemicals and fibers operations.
Asahi Kasei will buy Zoll in an agreed cash deal for $93 a share, a 24 percent premium to Zoll's closing price on Friday, the two companies said in a joint statement. The deal is Asahi Kasei's biggest acquisition by far.
The transaction, which adds to about $200 billion that Japanese firms have spent on overseas acquisitions in the past four years, is expected to close in the second quarter, the companies said. Asahi Kasei said it will finance the deal with loans.
Asahi Kasei derives more than half its sales from its chemicals and fibers businesses and almost a third from homes and construction materials. Combined, those businesses generate close to 90 percent of operating income.
Healthcare makes up just 7 percent of sales and 8 percent of operating income, but President Taketsugu Fujiwara said the 80-year-old company had identified the sector as a growth area.
This transaction will allow us to build on Zoll's strong U.S. business position and technology leadership, with Zoll forming the cornerstone of our critical care business, he said.
Zoll, a maker of resuscitation and critical care devices, derives a fifth of its revenue from a wearable defibrillator, it said in November. The company will become a wholly owned subsidiary of Asahi Kasei, and the current Zoll management, units and operations will remain intact.
Asahi Kasei signed an agreement last July with Zoll to market and distribute its wearable defibrillator in Japan.
Zoll's shares, worth just over $11 in 2009, late last month hit a record high of $76.22, up more than 64 percent from a year earlier. In January, the company reported first-quarter earnings per share of $0.29, topping expectations of $0.26, on revenue of more than $133 million.
Japanese companies have become increasingly acquisitive overseas in recent years as the domestic market has shrunk and a rising yen has provided more financial firepower.
The $200 billion spent on overseas buys over the past four years is more than double the amount spent in the previous four-year period.
Their spending power has been boosted by the yen, which rose to a record high of 75.31 per dollar in October from 111 yen at the end of 2007, an increase of 47 percent.
In May last year, Japan's largest drugmaker Takeda Pharmaceutical agreed to buy privately held Swiss firm Nycomed for 9.6 billion euros ($12.5 billion), the biggest overseas acquisition by a Japanese company since a $19 billion tobacco industry deal in 2007.
The $2.2 billion takeover dwarfs Asahi Kasei's previous biggest deal which was for about 10 billion yen ($122 million), a spokesman said.
Asahi Kasei plans to boost healthcare net sales by over 60 percent by its financial year 2015 from 2010 and operating income by 18 percent, it said in a presentation this month at an investment conference.
It described ageing as a megatrend that would lead to emerging demand for healthcare.
Last year, Asahi Kasei earmarked 450 billion yen for mergers and acquisitions and investments in new growth areas, saying medical would be one of its main targets. The company had 115 billion yen in cash and deposits at the end of December.
If Asahi Kasei's growth plans are successful, the company aims to increase the proportion of total operating income from healthcare to 13 percent by its 2015 financial year from 6 percent in 2010, the biggest boost among it businesses.
It sees the share of operating income from chemicals and fibers and homes and constructions materials falling over that period, the presentation showed.
Shares in Asahi Kasei closed on Monday at 518 yen, up from 517 on Friday. They have risen 11.6 percent so far this year, underperforming the benchmark Nikkei, which is up almost 17 percent.
Asahi Kasei is being advised in the deal by UBS Investment Bank and Zoll by Brown Brothers Harriman.