Would a Linde Acquisition Of Resmed Make Sense?

(Update below)

Or perhaps, why has it taken so long.

The homecare market has several business segments, ranging from care services to ambulatory home dialysis, lower value home patient aids, wheelchairs as well as higher margin and faster growing segments like respiratory and diabetic care.

One of these segments is sleep therapy. Sleep apnea is being increasingly diagnosed (and increasingly easier to be diagnosed) in larger numbers of patients. The principle treatment is a CPAP (and variations) machine which essentially minimizes periods of apnea during sleep - a syndrome that not only effects a persons ability to function 100% during the day but also has been clearly shown to increase the risk of heart disease and premature death.

Some companies that sell respiratory products into the home, segment their business according to oxygen therapy and sleep therapy. CPAP falling into the later category.

Oxygen therapy (oxygen concentrators, liquid oxygen) is slower growing and tends to follow population growth while sleep therapy is fast growing.

At the end of 2007 Phillips acquired Respironics - a leading full line respiratory products company - to enter the homecare space. This provided them the opportunity of entering the homecare medical business at the higher value end. Speculation immediately followed as to how long it would take for Resmed, Respironics prime competitor in the sleep business to be snapped up.

According to this press report out of Australia (the home of Resmed founder - Peter Farrell), Linde, German gasses multinational is rumored to be in talks to acquire Resmed.

Synergies are clear - combine the medical gasses business with the high growth and margin medical homecare segment and strengthen their homecare presence.

If this one does not happen another one will - soon.

Update July 1, 2008:

Resmed have reacted to the market rumor by issuing the following statement on on the Australian stock Exchange:

“ResMed notes the comments in the Age and Australian Financial Review newspapers published today, 1 July 2008 to the effect that the company “is being stalked by German industrial and medical gases giant the Linde Group” (Age) and to “rumours of an agreed
cash bid” (AFR) under the headline “Sceptics doubt ResMed rumour”.The company confirms that it is not aware of any information that would require disclosure to the ASX in terms of listing rule 3.1.

Further, the company has a policy of not commenting on market rumours.”

The market likes the rumor anyway??

Resmed is trading at $38.34 up 7.7% at time of writing July 1, 2008

http://finance.yahoo.com/q?s=RMD