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Asahi Kasei Buying ZOLL for $2.2B

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In a bid to beef up its health care business, Tokyo-based leading chemical manufacturer Asahi Kasei has agreed to take over Resuscitation devices maker ZOLL Medical in a deal worth roughly $2.21 billion. The transaction, which has been cleared by the Boards of both companies, is expected to consummate in second-quarter 2012.

ZOLL Medical is a leading player in the global market for external defibrillators (worth more than $1 billion) and competes with Physio-Control, a wholly owned unit of Medtronic (MDT - Free Report) , and Philips (PHG - Free Report) .

The company makes the LifeVest wearable defibrillator, a lightweight device which is worn outside the body by patients at risk of sudden cardiac arrest (“SCA”). Its sales soared 18% year over year to $133.7 million in the most recent quarter on the heels of robust revenues from LifeVest, backed by its Temperature Management business.

Per the deal, Asahi will make a cash tender offer to buy the outstanding shares of ZOLL Medical for $93 a share. The purchase consideration represents a 23.8% premium over ZOLL’s closing price on March 9. The offer is expected to begin within ten business days and will be open for at least twenty business days.

Closing of the tender offer is subject to customary conditions including appropriate regulatory approvals and the minimum tender of at least two-thirds of ZOLL’s outstanding shares. The company’s Board has recommended its shareholders to accept the offer and tender their shares once the offer is made.

Following the closure of the tender offer, Asahi plans to implement a second-step merger, under which the remaining ZOLL shares (not tendered) will be converted into the rights to receive equivalent cash price per share as quoted in the offer. 

Pursuant to the completion of the deal, ZOLL will become a fully-owned subsidiary of the Asahi Kasei Group while retaining its existing management team and business operations. 

The agreement builds upon the partnership between the two entities (inked in July 2011). The deal provided Asahi with the exclusive distribution rights to ZOLL’s AED PLUS automated external defibrillator (“AED”) in Japan (the world’s second-largest external defibrillator market).

The acquisition will enable Asahi to leverage ZOLL’s leadership in resuscitation technologies to accomplish its long-term goal of creating a globally competitive health care business with a unique focus on critical care.  It extends the development of the company’s “Health Care for Tomorrow” project which focuses, among other things, on the resuscitation sector in which ZOLL has a strong global presence.

Our Outperform recommendation on ZOLL Medical is backed by a Zacks #2 Rank, which translates into a short-term Buy rating.

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