Category — Investors

Handicare continues it’s aggressive acquisition strategy in Europe, now entering the bath aid segment with Linido – a company based in the Netherlands. They further continue to build on their presence in the Netherlands following it’s Movingpeople and Freelift acquisitions.

Linido generally caters to the higher end bath products segment and is a relatively small acquisition for Handicare at 11 million Euros.

More information here:

Handicare AS acquires Linido

Moss – 3 November 2008 – Handicare AS acquires Linido, one of the leading European players within bathroom safety products for elderly and handicapped. This acquisition will bring the total operating revenue in Handicare to 250 million EURO. Handicare has now 1 000 employees in 10 different countries.

Linido has a leading position within bathroom safety products in Holland and has a strong position in the European market. The company is located in the Netherlands and has sales to some 15 export markets.

Linido has a 70 year old history, and has some 50 employees and operating revenue of 11 million EURO. The Managing Director Jitske Bijlsma, will continue her position in the company.

The health care company Handicare AS, owned by Herkules Private Equity Fund , was founded in 1986 and has operations in technical aids like wheelchairs and home care products in addition to adaptation of cars for elderly and physically disabled people. Through its subsidiary Puls, the Group also has a leading position in Norway in the sales of capital goods and consumables to hospitals and institutions. Handicare has its headquarters in Moss, Norway, and has subsidiaries in Sweden, Denmark, Germany, the Netherlands, England, Belgium, USA and Canada, and distributes its own products to an additional 30 markets.

The acquisition of Linido is part of Handicare’s growth ambitions. ”We will grow both organically and through acquisitions and we have a strong development internationally”, says CEO, Per Gunnar Borhaug in Handicare. ”With the number of elderly people increasing, combined with the wish for many elderly to stay at home as long as possible, we are now able to offer a wider range of bathroom safety products in addition to other products for home care and institutions. Linido is a company which strengthens our product assortment and together with Linido we aim to improve our position in several geographical markets”, says Borhaug. “Linido is a healthy company which will add great value to the group’s business activities and will play a major role in Handicares business area for Patient Handling and Bathroom Safety Products under Handicare Executive Hardy Brännströms leadership”, says Borhaug.

”We in Linido are exited to become part of the Handicare Group, says the managing director, Jitske Bijlsma in Linido. ”Together with Handicare we can continue to develop even further and we can exploit important synergies in some markets”, she says. ”Linido has a very positive development both in operating revenue and results through the last years, and I expect this to grow even further with Handicare as the new owner”, says Bijlsma.

Linido was owned by Berk Partners, a Dutch private equity firm, together with management.

Questions regarding the acquisitions should be addressed to:

Per Gunnar Borhaug
CEO
Handicare AS
Tel: 0047 90739441

Hardy Brännström
Managing Director
Patient handling & Bathroom safety
Tel: 0046 703840022

Jitske Bijlsma
Handicare Managing Director
Linido B.V.
Tel: 0031 153695440

European home healthcare companies have been very aggressive and ahead of the outsourcing curve in terms of Asian sourcing. This has been born, not only as a result of optimizing their bottom lines, but out of necessity as European government pressures on reimbursement (especially in Germany) have increased dramatically.

Here is an example of the problem – and this just scratches the surface.

It is no secret that manufacturing companies as well as pure distribution companies have been competing for the volume of hundreds of thousands or perhaps millions of wheelchairs, rollator, walker or other patient aid products. Price competition has been fierce and margins, after shipping are often less than 1O%.

It is also true that products sourced in Asia are commonly quoted in US Dollars. European customers have benefited from a rising Euro over the past three years and have become complacent as to currency risk as the favorable exchange bubble continue to grow.

Three months ago 1 Euro would have bought you 1.55 US Dollars. Today 1 Euro will buy you 1.29 US Dollars. A drop of round about 20%. Check the chart.

Here is my take on this:

The Chinese are not going to be able to decrease their costs meaningfully.

The Governments are not going to raise their reimbursement prices.

The Manufacturers are not going to sell at a loss.

The Dealers are going to take a haircut.

Manufacturers or Dealers that have signed up for a low competitive bid in Germany are going to have to visit their bank for a loan.

The Banks don’t have any money to loan.

You will recall two days ago the market noise that Resmed was about to be picked up by German Linde. We blogged about it here.

Now CNBC’s Jim Cramer talked about them benefiting from the potential reversal or low impact of competitive bidding. (I don’t think competitive bidding will be substantially reversed just to be clear.

Jim Cramer goes on to issue a potential target price of $53 which is a cool 30% premium.

(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

Blackstone group has bid a 33% premium to take homecare services and distribution company Apria private. The Blackstone investment is $920 million which is big in the homecare industry although relatively modest in Blackstone terms.

All this despite the homecare industry cries of Medicare foul over the what is clearly the biggest pressure on pricing and reimbursement in recent history – especially through the much hated new National Competitive Bidding program.

This investment is clearly good for the industry (however there must be some lawmakers and lobbyists scratching their heads as to how to explain why such a supposedly handicapped industry is attracting investors like Blackstone).

Of course the argument will be made about unlocking the value in Apria which has suffered from some self inflicted wounds in recent years – true – but it also makes great strategic sense as well.

About two years ago I blogged about the coming changes in the industry “(Why) Would You Invest In The Home Healthcare Industry?”

It’s a fairly lengthy analysis however one of the key take aways was that National Competitive Bidding and the future environment would benefit distribution owned groups (like Apria) – looks like Blackstone might be in agreement.

As always the market tells the story. We note that in smaller private deals investors are paying 4 to 6 times multiples for manufacturing companies while distribution companies are fetching double digit multiples today.

In the above analysis the summary takeaway applies even more today than it did then.

Just to be upfront the recommendation is going to be to invest in “change”. Identify what the change will be and buy into it. Divest companies (or management) that believe “nothing much will change”. It is not a place for the faint hearted. It is certainly not business as usual. Past performance is definitely not a reliable indicator in the homecare business today – or rather tomorrow.

This acquisition comes as no surprise and fits not only with the Permobil value added product line but establishes a larger footprint in the French market – a market so far largely shunned by other large Nordic players like Etac and Handicare. This represents another investment for Nordic Capital, relatively new owner of Permobil.

It also continues the buying spree of the “Homecare Vikings” which we wrote about two years ago and at the beginning of this year when Handicare had just completed two acquisitions within months of each other.

There is no question that “stand up” chairs, both manual and powered, offer higher margins to manufacturers. It is also true that this market segment is maturing with the mainstream large manufacturers having entered the market in the past year or two – better late than never.

Could we be heading back to those heady days in the mid 90’s when now market leaders Invacare and Sunrise went on big buying acquisition drives, or are the Scandinavian homecare vikings being more selective?

Here is what Hans Bergh, CEO at Permobil says:

As part of its international development strategy in the field of specialist medical equipment for the handicapped community, PERMOBIL has just carried out the acquisition of the French company LIFESTAND, situated in Lyon.
LIFESTAND, which was founded in 1978, specialises in the design and manufacture of « stand-up » wheelchairs. These wheelchairs, which can be operated manually, semi-electrically or fully electrically, enable a disable person to stand upright.
The company, which has a staff of 30 people, markets its products worldwide, with 80 % of sales into export markets. It has a subsidiary in both Germany and Belgium.

Annual sales exceeds 8M Euros, with good profitability.
This transaction strengthens PERMOBIL’s position in a key, potentially high growth, market in which it is already present with its powered wheelchairs !

“This acquisition gives a great opportunity to develop even further our position in this field thanks to LIFESTAND’s full gamut of top of the range « stand-up » wheelchairs, which cover all pathologies”, says PERMOBILS CEO Hans Bergh

For LIFESTAND, this merger with such a well-established group will enable it to widen its distribution network, particularly in the United States.

For more information :
www.permobil.com
www.lifestand.eu

It will be interesting to see the integration strategy of this Swedish and French company.

Many people in the healthcare industry do not know the company DCC. What they should know however is that it is a very successful €5 billion business services and distribution company based in Ireland. While a small part of overall revenues, their healthcare business has revenues approaching €300 million making it very significant in the space in which it operates.

The healthcare business boasts year on year revenue growth in excess of 20% and an impressive average annual operating profit of 17% over the last 5 years. Their three business groupings within heathcare are Mobility and Rehab (which operates primarily in Europe and Australia with the Days Healthcare, Physio-Med and Metron brands), Fannin (Ireland’s leading distributor as well as a UK operation) and the Health and Beauty sector(outsourced solutions – largely nutraceuticals).
Jim Flavin CEO – founder and primary driver behind the company, has just announced his resignation over a long ongoing and hotly contested dispute concerning the sale of shares in Fyffes, a company that Jim Flavin was a board member of way back in 2000.

DCC has appointed Tommy Breen Chief executive and Michael Buckley, non-executive Chairman with immediate effect.

There is considerable speculation as to what their future strategy will be. As recent as May 19, Flavin had announced in the preliminary year end results that

As previously announced, an important part of my responsibilities as Executive Chairman is to lead a reappraisal of our overall strategic direction so that DCC is best positioned for sustainable long-term growth. This process is ongoing and I plan to put recommendations before the Board by the end of the current financial year.

There is much speculation in the investment community about what this means including an estimate that breaking up the businesses could yield in excess of a billion euros for shareholders.