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Physio from Eli Lilly in 1994 for undisclosed sum, although speculation was that it paid $200 million to $300 million at the time. One year later, Physio-Control went public. By 1998, Bain cashed in, selling Physio to Medtronic for $538 million.
Webster, who has more than 20 years of experience at Physio, remembers what it was like under Bain ownership before. And he sounds like he’s looking forward to it again.
“We have a high degree of respect for the Bain Capital team, and are thrilled about having them as our new owners,” Webster says. “Some of the things you get out of an ownership change is more focus. We were a small piece of a large company, and by definition, you don’t get that kind of focus. You’ll see a company focused on growth. I expect we’ll be more aggressive in the marketplace, we’ll be nimble, quick, and you’ll see a stream of medical devices innovations.”
While being more aggressive, Physio-Control does have some work to do in tightening up its financial statements. The company generated almost $430 million in revenue last year as part of Medtronic, and it does expect to increase that number in 2011, Webster says. Physio-Control is profitable, he says, but it doesn’t disclose its actual net income. Cramer said the company will be in better shape once it increases its gross profit margins by 10 to 15 percentage points.
The $487 million purchase price being announced today might sound low for a company with almost $430 million in annual revenues, but as Webster joked “the Bain guys feel like it’s a pretty big check.” Uncertainty in the economy, and a general down market for acquisition premiums put downward pressure on the purchase price, Webster says.
Locally, Physio-Control has a long history as a company that has collaborated with the Seattle Fire Department’s Medic One program, the Seattle and King County Emergency Medical Services, the University of Washington Medical Center, and other partners. Those relationships will continue, and Physio is looking forward to “strengthening our footprint as a local employer,” Webster says.
At some point in the future, Cramer says it could be possible for Physio-Control to go public again. But that’s not the first thing on Webster’s mind today.
“We are excited about the opportunity to be a privately held, standalone Physio-Control,” Webster says. “We are looking forward to the future.”
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