Software and Internet firm WebMD Corp. announced Aug. 4 that it has sold its KippGroup and Point Plastics Inc. medical injection molding units for $46.5 million, several years after it bought them for $138 million.
Medegen Holding LLC, a molder of proprietary medical devices, bought the KippGroup unit in Ontario, Calif., while Apogent Technologies Inc., a maker of clinical and laboratory products, bought the former Point Plastics unit in Petaluma, Calif. Terms for the individual sales were not disclosed.
WebMD, which developed the medical information Internet site WebMD.com, bought the plastics companies in the dot-com boom of the late 1990s with the goal of building a larger medical products group. But the plastics operations quickly became dwarfed by the e-commerce business, and the firm has been trying to sell its manufacturing units for several years.
Both Medegen and Apogent said the purchases substantially boost their presence in key markets, and give each firm significant new production capacity. Medegen gets Kipp's proprietary intravenous equipment line and Apogent acquires new lines of pipette tips.
The units, which were part of WebMD's Porex Holdings Inc. unit, had combined sales of about $54.2 million in 2002, with profit of $3.4 million. WebMD said it would take a $36 million loss on the sale.
Medegen of Scottsdale, Ariz., had been talking to WebMD about buying the Ontario operations for about two years, said Jeff Goble, president of Medegen Medical Manufacturing Services. The operation has strong, proprietary plastic products, including its IV line, and experience as a contract medical-device maker, he said.
Medegen, formerly Tech Group's proprietary product business, formed the Medical Manufacturing Services unit to work with medical and pharmaceutical original equipment manufacturers. Proprietary products made up about 75 percent of the Ontario plant's business, he said.
With the Ontario operations, Medegen's sales will exceed $100 million, he said. The Ontario plant will add 200 employees and 45 injection presses to Medegen's existing 500 employees and 80 molding machines.
The plant has a toolroom, Class 100,000 clean room molding and assembly operations, and is approved to manufacture Class II medical devices. WebMD bought Kipp in 1999 for stock valued at $52.1 million.
Like Medegen, Apogent had been interested in its acquisition for several years.
The Portsmouth, N.H.-based manufacturer tried to buy the unit in 1998 but was outbid by WebMD's corporate predecessor, Synetic Inc., which had a lot more money to spend during the height of the dot-com boom, said Adam Taich, director of investor relations at Apogent. Synetic paid $86 million in a cash and stock deal.
The company will bring the Petaluma plant, which was part of Porex Bio Products, under its Molecular BioProducts unit in San Diego. The two facilities will remain open, Taich said.
The acquisition is expected to have about $30 million in sales in its first year, he said.
The Molecular unit injection molds filtered pipette tips, which are high-margin products used in genetic testing. The acquisition significantly expands its presence in unfiltered pipette tips, Taich said.
For publicly traded WebMD, the sale marks another chapter in its on-again, off-again relationship with its plastics units.
While it bought them to build a plastics medical manufacturing group, it now said it is selling them because they would require long-term investments to remain competitive.
``Although these businesses are profitable, the prospect of making additional investments in a noncore business in an increasingly competitive market led to our decision to change our strategy and divest these businesses,'' said Roger Holstein, chief executive officer of Elmwood Park, N.J.-based WebMD.
WebMD, however, will retain the rest of its Porex subsidiary, which makes proprietary porous plastics products like filters. More than 85 percent of WebMD's $925 million in sales last year came from its software and online businesses, including electronic systems for physician bill paying and information exchange.
In a news release, Holstein said the company is focused on new product development at Porex such as surgical implant biomaterials, water filters, printer components and its patented membrane technology for immunoassay diagnostic testing.
Until February, however, WebMD had been trying to sell or spin-off the entire Porex operation. It abandoned that because it said in Securities and Exchange Commission filings that it was not getting the money it thought they were worth.
Porex, including the other two units that have been sold, had sales of $120 million in 2002. Analysts said the company had hoped to get $250 million to $300 million from a spin-off of the operations last year.