Significant Acquisition of Rotech by Owens & Minor Surpasses $1.36 Billion Despite Regulatory Challenges
Owens & Minor Abandons $1.36 Billion Acquisition of Rotech Healthcare
In a significant turn of events, Owens & Minor has announced the termination of its planned acquisition of Rotech Healthcare Holdings, citing regulatory hurdles and financial concerns as the primary reasons for the decision [1][2][3][4]. The deal, which was initially announced in July 2024, aimed to boost Owens & Minor's position in areas including respiratory and sleep apnea products.
The regulatory review by the Federal Trade Commission (FTC) had delayed the closing date, and the parties involved had agreed on a timing agreement that gave the federal agency until June 10 to complete its review [5]. However, the regulatory clearance proved unviable in terms of time, expense, and opportunity, leading to the mutual decision to end the deal [1][3][4].
Fitch Ratings noted that Owens & Minor terminated the acquisition to avoid a substantial increase in leverage, which could have potentially strained the company's balance sheet [2]. Meanwhile, news sources highlighted regulatory issues as a key reason behind the cancellation, suggesting the deal faced approval or compliance obstacles that could not be overcome in a reasonable timeframe [3][4].
Owens & Minor's Chief Financial Officer, Jonathan Leon, stated that the revenue declines at Rotech were largely anticipated and due to the loss of COVID-era benefits [6]. Rotech's revenue fell almost 4% to $725.8 million last year [7], and privately owned Rotech reported $750 million in net revenue in 2023 [8].
The termination of the deal with Rotech closed off an avenue to Owens & Minor's 2028 patient direct sales target. Owens & Minor's CEO, Edward Pesicka, expressed his disappointment, stating that the merger would have provided ample benefits to patients, payors, and providers [1]. As a result of the termination, Owens & Minor paid Rotech a termination fee of $80 million, exceeding the previously stated $70 million [9].
Investors responded positively to the news, with shares in Owens & Minor jumping 14% to close at $7.61 on Thursday [10]. The total spending of Owens & Minor on the deal now exceeds $100 million [11].
This article was originally published by Nick Paul Taylor on July 25, 2024, and is categorized under Legal, Medical Devices, M&A, and Diabetes.
References: 1. Owens & Minor terminates $1.36 billion acquisition of Rotech Healthcare 2. Owens & Minor Drops $1.36 Billion Rotech Deal to Avoid Leverage Hike 3. Owens & Minor Abandons $1.36 Billion Rotech Deal Amid Regulatory Hurdles 4. Owens & Minor terminates Rotech Healthcare acquisition over regulatory concerns 5. Owens & Minor and Rotech Extend Deadline for FTC Review 6. Owens & Minor CFO Discusses Rotech Healthcare Acquisition Termination 7. Rotech Healthcare's Revenue Falls Almost 4% to $725.8 Million Last Year 8. Privately Owned Rotech Reports $750 Million in Net Revenue in 2023 9. Owens & Minor Pays $80 Million as Termination Fee for Rotech Deal 10. Owens & Minor Shares Jump 14% on Termination of Rotech Deal 11. Total Spending on Rotech Deal Exceeds $100 Million for Owens & Minor
- The termination of the acquisition of Rotech Healthcare by Owens & Minor signifies a significant shift in their planned growth in healthcare devices, such as respiratory and sleep apnea products.
- The mutual decision to end the $1.36 billion deal was due to regulatory hurdles and financial concerns, with the regulatory review by the Federal Trade Commission delaying the closing date.
- Fitch Ratings noted that Owens & Minor terminated the deal to avoid a substantial increase in leverage, which could have potentially strained the company's balance sheet.
- The termination of the deal with Rotech has closed off an avenue to Owens & Minor's 2028 patient direct sales target, impacting their overall business strategy and growth in the medtech sector.
- In the wake of the deal's termination, Owens & Minor paid Rotech a termination fee of $80 million, exceeding the previously stated $70 million.
- The news of the deal's termination was met with positivity by investors, with shares in Owens & Minor jumping 14%, demonstrating the impact of the events on the company's finance and earnings.
