Kodak sells health unit to Onex in $2.55 billion deal
ROCHESTER, NY – Eastman Kodak Company has announced the sale of its Healthcare Group to Toronto-based Onex Healthcare Holdings, Inc. in a deal valued at up to $2.55 billion.
Known for its CareStream picture archiving and communication system (PACS) and radiology information systems (RIS), Rochester, N.Y.-based Kodak Health Group is a world leader in healthcare information technology products and services. Kodak has also been the leader in x-ray technology since its inception in the 19th century.
The acquisition will add to Onex Healthcare’s operations, which include emergency care facilities and diagnostic imaging clinics. Onex Healthcare is a subsidiary of Onex Corporation, 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 allow 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,” said Hobert.
Citing declines in earnings and digital sales, Kodak announced last year its interest in selling the Health Group. Antonio M. Perez, Kodak chairman and chief executive officer said in May, “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. Given our valuable assets and the changing market landscape, we feel that now is the time to investigate strategic alternatives.”
In the company’s announcement of the deal with Onex, Perez said Kodak now plans to focus on the digital growth opportunities in consumer and professional imaging and graphic communications.
Le Blanc said in a release that Onex is impressed by the 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,” he added.
The deal is expected to close in the first half of 2007, after which an estimated 8,100 Health Group employees will continue working for Kodak, the company said. “Our employees are going to have the same compensation and job titles, so by and large this won’t affect them,” said Hobert.
The Health Group reported $2.54 billion in revenue for the fiscal year ending Sept. 30, 2006, and now plans to pay off $1.15 billion in secured debt. The company’s investors will discuss other uses for the sale revenues at an annual investor meeting on Feb. 8.