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Furon to Buy Medex for $160 Million

Mergers: Laguna Niguel maker of of plastic and rubber products seeks to expand into medical arena.

November 14, 1996|JOHN O'DELL | TIMES STAFF WRITER

LAGUNA NIGUEL — Furon Co., a leading manufacturer of plastic and rubber products for industry, said Wednesday that it has agreed to acquire Ohio health-care products maker Medex Inc. for cash as part of a diversification strategy.

After the merger with Medex, which had $99.3 million in sales for the fiscal year ended June 30, Furon's total annual sales would be about $450 million. Medical components and products would account for about 23% of the total--up from 3% now.

J. Michael Hagan, Furon's chairman and chief executive, said that the $160-million tender offer is part of an acquisition plan aimed at reducing the Laguna Niguel company's exposure to the more volatile industrial market, where most of its products are sold.

The $23.50-per-share offer for Medex was almost 55% higher than the company's stock price on the Nasdaq market and sent Medex shares soaring. More than 3.1 million shares of Medex traded Wednesday as the stock shot up to $23.25, an $8 gain. Trading volume was almost 80 times the daily average of 38,450 shares over the past six months.

Furon stock dropped 62.5 cents a share to close at $20.375 in light trading on the New York Stock Exchange.

Hagan declined to discuss Furon's pricing of the deal, saying that Securities and Exchange Commission regulations preclude such comment while the tender offer is in progress.

He said, however, that Medex will provide Furon with a platform from which to expand its presence in the medical equipment and products industry. In addition to a well-known line of high-quality products that Furon can build on, Hagan said, Medex has "super channels" of distribution in the U.S. and European medical products markets.

Unlike Medex, which sells directly to health care providers, most of Furon's polymer and rubber products, including its small line of medical components, are sold to other manufacturers to use in their own finished products.

Furon brings to the deal a broad base of experience in manufacturing with polymers as well as experience in developing new plastic compounds and materials, "a technology that Medex doesn't have," Hagan said.

The company recently completed a yearlong review of its growth strategy and decided that it needed to expand into the medical arena, which is seen as a growing industry that will provide a steady flow of revenue to help smooth out the cyclical highs and lows in Furon's other business areas.

Hagan said the company intends to continue increasing business volume in all segments. But he said he would like to see the medical area grow a bit faster than others and eventually account for 25% to 30% of total sales.

The proposed acquisition has been approved by the boards of directors of both companies but remains subject to approval by regulators and holders of at least 60% of Medex's shares.

Medex is required to pay Furon an $8-million breakup fee under some circumstances if the deal falls through.

Medex, which has 1,100 employees, will continue to operate under its own name and with current management, a Furon spokesman said.

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