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Birtcher to Cut 80% of Staff, Close Irvine Office if Merger OKd : Deal: The N.Y.-based competitor looking to acquire the firm wants its products and Mexican operation, not its workers. Employees expected the layoff announcement.

January 19, 1995|JOHN O'DELL | TIMES STAFF WRITER

IRVINE — Birtcher Medical Systems said Wednesday that its entire office, research and management staff, as well as most of its sales force, will be laid off and its Irvine headquarters closed if shareholders approve a merger with a New York-based competitor.

More than 100 of the company's 120 employees, including 83 in Irvine, would lose their jobs in the merger, proposed in December by Conmed Corp.

Analysts said Conmed's primary interest is in Birtcher's products and its contract manufacturing operation in Mexico. The company would have little use for Birtcher's management and scientific staff, which would duplicate its own.

"It's pure economics," Evan Sturza, a technology analyst in New York, said of the layoff plan.

Birtcher has lost more than $24 million in the past three years despite having a highly regarded line of electrosurgical equipment and an established sales network, analysts said.

The electrosurgical equipment business depends on sales to hospitals, which are under such tight financial constraints that they invariably order from the lowest-cost provider, said Jeffrey Barnes, an analyst with the brokerage Needham & Co. in New York.

Birtcher, he said, is simply too small to compete.

Conmed is expected to report about $70 million in sales for 1994. The company posted a profit of $3.7 million for the first nine months of the year. Birtcher, by contrast, has seen its sales decline from a high of $52.4 million for fiscal 1992 to $34.3 million last year, when it lost $20.6 million.

Conmed said it is proposing to keep seven Birtcher employees in El Paso, Tex., to coordinate work at a plant that employs about 100 people in Juarez, Mexico. In addition, officials said, some of Birtcher's 30 salespeople might be retained.

Employees have known for some time that a layoff announcement was coming, said Murtis Diallo, a customer service representative at the 65,000-square-foot headquarters and manufacturing facility that Birtcher leases in the Irvine Spectrum industrial park.

"We were told Monday that March 31 is the date that we will lose our jobs," Diallo said. "People have been leaving all over the company because they knew" this was coming, she said.

Conmed officials could not be reached for comment Wednesday.

At Birtcher, President Kenneth C. Cleveland said the company "needed a major infusion of capital. We lost 80% of our net worth last year." Cleveland, a specialist in reviving failing businesses, was hired in May to pull Birtcher out of its nose-dive.

"These decisions are never easy," Cleveland said. "It is difficult to let people go."

Birtcher will provide laid-off workers with a severance package and help with job searches, Cleveland said, though he would not disclose details. Birtcher and Conmed officials "are talking," he said, about the possibility of some of Birtcher's researchers being hired as consultants by Conmed.

The merger proposal calls for Birtcher shareholders to receive one share of Conmed common stock for every 12 shares of Birtcher common and one Conmed common share for every two shares of Birtcher preferred.

Birtcher common shares, which traded as high as $22 in 1991, closed Wednesday at $1.375, unchanged for the day. Conmed closed at $19.625, up 87.5 cents. Both companies' common shares trade on the Nasdaq market.

The rationale for selling Birtcher and laying off most of its work force "is that it is more expensive to operate in Orange County than in Denver, Colorado, or Utica, N.Y., where Conmed has its facilities," Cleveland said. "They make the same type of product line."

The shutdown would add to the woes of Orange County's economy, which for several years has been losing relatively well-paid technology and management positions to lower-paying service industry jobs.

Most recently, the bankruptcy of the county government brought the layoff of more than 400 government employees.

*

Times correspondent Hope Hamashige contributed to this report.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Birtcher at a Glance

Birtcher Medical Systems will lay off more than 80% of its staff in Irvine and outlying areas if shareholders approve the terms of its acquisition by New York-based Conmed Corp. A profile of Birtcher: * Founded: 1935 * Moved to Orange County: September, 1990, from El Monte * President: Kenneth C. Cleveland * Principal products: Electrical instruments for surgery * Employees: 120 (83 in Irvine, seven in Texas, 30 in outside sales)

Source: Birtcher Medical Systems; Researched by VALERIE WILLIAMS-SANCHEZ / Los Angeles Times

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