Eastman Kodak Company announced January 10 that it has entered into an agreement to sell its Health Group to Onex Healthcare Holdings Inc., a subsidiary of Onex Corporation, in a move that will sharpen Kodak’s strategic focus on consumer and professional imaging and the graphic communications industry.
Under terms of the agreement, Kodak will sell its Health Group to Onex for up to $2.55 billion. The price is composed of $2.35 billion in cash at closing, plus up to $200 million in additional future payments if Onex achieves certain returns with respect to its investment. If Onex Healthcare investors realize an internal rate of return in excess of 25 percent on their investment, Kodak will receive payment equal to 25 percent of the excess return, up to $200 million.
Because of tax-loss carry forwards, Kodak expects to retain the vast majority of the initial $2.35 billion cash proceeds. The company plans to use the proceeds to fully repay its approximately $1.15 billion of secured term debt. Other potential uses of the cash proceeds are under review and will be discussed at Kodak’s previously announced investor meeting, scheduled for February 8.
About 8,100 employees associated with the Health Group will continue with the business following the closing. Included in the sale are manufacturing operations focused on the production of health imaging products, as well as an office building in
Kodak’s Health Group, with revenue of $2.54 billion for the latest 12 reported months (through September 30, 2006), is a worldwide leader in information technology, molecular imaging systems, medical and dental imaging, including digital x-ray capture, medical printers and X-ray film.
Onex Corporation, based in
“Kodak’s Health Group is a business with significant market presence and intellectual property assets,” said Antonio M. Perez, Kodak’s chairman and CEO. “This sale maximizes shareholder value by obtaining a full and fair valuation for this business, and allows Kodak to increase its financial flexibility.
“We now plan to focus our attention on the significant digital growth opportunities within our businesses in consumer and professional imaging and graphic communications.”
Perez noted that Onex brings significant financial resources to invest in the Health Group business and to ensure its continued success.
“Onex is an ideal acquirer of Kodak’s Health Group because they understand the health industry and are committed to growing the business for the benefit of customers and employees,” Perez said. “I’m very pleased that we have such a favorable outcome for all of our constituents.”
“This is a great opportunity to acquire and grow a business that has established an impressive record in delivering innovative solutions to customers around the world,” said Robert M. Le Blanc, an Onex Corporation managing director. “Kodak’s Health Group has an exceptionally strong management team and we share this team’s vision for the future. We recognize that growth is critical and that digital technology is the future, and we believe strongly that customers and employees must continue to be a top priority.”