Injection molder Ballard Medical Products plans to merge with consumer products giant Kimberly-Clark Corp. in a $764 million stock transaction pushed by consolidation in the medical-device industry.
Ballard, which molds catheters and extrudes tubing at plants in Utah and Idaho, faced increasing pressure from hospital buying groups that want to cut the number of suppliers they deal with.
``We were kind of at a crossroads where we recognized that to exist in the medical industry, we needed to look at getting very large, or being acquired,'' said Ken Sorenson, Ballard's chief financial officer.
Publicly traded Ballard has annual sales of $150 million, with profit of $32 million from proprietary disposable products like enteral feeding tubes, defibrillator pads and its Trach Care catheters, which account for about 40 percent of its sales.
Ballard, based in Draper, Utah, sells more than 80 percent of all closed-suction catheters used in U.S. hospitals, the company said.
Kimberly-Clark said it wants to broaden its product line for its health-care business, which makes surgical gowns and drapes, sterilization wraps and face masks.
``It is a small but profitable business that we have said for some time we are interested in expanding,'' said Tina Barry, spokeswoman for Dallas-based Kimberly-Clark. Her firm's health-care business has seen double-digit annual sales growth, she said.
Sorenson expects Kimberly-Clark to expand both of Ballard's plants eventually.
Barry said Ballard will be operated as a stand-alone business in Kimberly-Clark's existing health-care unit, resulting in sales for that division of $700 million in 1999.
Ballard gives Kimberly-Clark its first plastics production capability. Ballard has more than 40 injection molding machines, two extrusion lines, two form, fill and seal machines and a blow molding machine. It has a 300,000-square-foot plant in Draper and a 210,000-square-foot plant in Pocatello, Idaho.
The deal gives Ballard shareholders $25 worth of Kimberly-Clark stock for each Ballard share. Ballard shares topped $27 in early 1998, but fell to about $17 during the summer when sales growth dropped from 20 percent annually to the low teens because of price pressures from major hospital buying groups, Sorenson said.
During the rest of the year, the stock price slowly climbed back to the low $20s before the Dec. 23 purchase announcement, he said.
The merger will be worth about $25.6 million to Ballard Chairman Dale Ballard and his wife, Alice, who own 3.35 percent of the company, according to Securities and Exchange Commission filings.
Ballard founded the firm in 1978 and took it public in 1983. He will remain a consultant, but David Murray, president of Kimberly-Clark's professional health-care business, will lead the combined operation.
The deal still requires approval of Ballard shareholders and antitrust regulators.