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Medical Action Industries agrees to $208M buyout offer from Owens & Minor

Paul D. Meringolo, chief executive, president and chairman

Paul D. Meringolo, chief executive, president and chairman of Medical Action Industries Inc. in April 9, 2007. Credit: Patrick Oehler

Medical Action Industries Inc., a Brentwood-based maker of burn dressings, surgical marking pens and hats for newborns, has agreed to a $208 million buyout by its largest customer, Owens & Minor Inc., the companies announced Wednesday.

The deal calls for Owens & Minor, based in Richmond, Virginia, to acquire all outstanding shares of Medical Action for $13.80 per share. Shares of Medical Action closed Wednesday at $13.68, up 93.49 percent.

The impact of the deal on Medical Action's workers and Long Island facilities remained unclear. Neither company responded to requests for comment. The formal merger agreement said that Owens & Minor does not contemplate layoffs or an early retirement program before closing the deal.

The acquisition of Medical Action is the latest in a string of corporate and private equity buyouts of Long Island's publicly traded companies.

In May, Plainview-based aerospace contractor Aeroflex Holding Corp. agreed to be acquired by Cobham PLC, a British aerospace company, for $1.46 billion. In April, Akorn Inc., based in Lake Forest, Illinois, announced that it had completed its acquisition of Amityville-based drugmaker Hi-Tech Pharmacal Co. for $640 million in cash. In December, Manhattan private equity firm Wasserstein & Co. completed a $340 million purchase of Globecomm Systems, a wireless communications provider based in Hauppauge.

Medical Action, which employs 815 people, posted $287.8 million in net sales from continuing operations for the fiscal year ended March 31. Owens & Minor, a distributor of medical and surgical supplies ranked 303rd on the Fortune 500, accounted for about 45 percent of those sales.

"Our companies have enjoyed a highly collaborative relationship for over 35 years, are built around similar cultures and values and are respected throughout the health care community," said Medical Action chief executive Paul D. Meringolo.

The deal is subject to federal antitrust review and must be approved by Medical Action's shareholders.

Medical Action agreed not to solicit alternative suitors, and Owens & Minor will have the opportunity to match any competing bids, according to a government filing. If Medical Action's board rescinds its recommendation for the buyout agreement in favor of another offer, the company must pay a breakup fee of $9.3 million to Owens & Minor.

"The acquisition of Medical Action is consistent with our strategic focus and a natural extension of Owens & Minor's core capabilities as we look to broaden our service offering," said Owens & Minor chairman and CEO Craig R. Smith.

Owens & Minor estimated annual pretax cost savings related to the deal of $10 million to $12 million by the end of 2016.

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