ICU Medical Hospira Acquisition Call

Vivek Jain

Small companies have to get bigger or get consolidated in maturing markets

“ICU went through a pretty public sales process in 2013, and I believe the concentration issues was one of the key reasons it didn’t reach completion, and I think that concerned has been an issue in all strategic discussion and is the number one investor concern. Small companies either have to get bigger or get consolidated, and it’s incredibly hard for small companies to get bigger in maturing markets.”

Pfizer took $400m in stock

“Pfizer’s participation detailed on Slide 13 was a really important part of the deal to us. Pfizer accepted 3.2 million shares at approximately $125 a share as consideration and will become our largest shareholder. They will receive a board seat and have signed a voting agreement to support the Board’s decision. Doug Giordano, Senior Vice President of Worldwide Business Development for Pfizer will join our Board. Pfizer will be subject to an 18-month lock up which is correlated to successful carve-out of the business and ICU has provided incentive for an orderly disposition of the shares through an underwritten offering.”

Unusual for small supplier to buy their customer

“We like this structure because it aligns incentives and we are deeply honored to have Pfizer as a holder of ICU. We recognize the situation of a small supplier buying their customer is unusual and their willingness to believe in our team and the opportunity with these assets made this happen. From a shareholder perspective between them and our founder over 25% of our ownership is represented on the board which is a good thing.”

2017 will be bumpy

“2017 will be bumpy. There are a number of reasons and drivers for that. Timing is a huge variable; adjustments related to the transaction will be a large driver, including shorting the supply chain by net reduction of ICU sales into Hospira. The focus of 2017 will be on a more efficient use of working capital et cetera. Because all these adjustments over the first few quarters will not allow us to be as sequentially predictable as we’ve been. It will not be like ICU in the last 10 quarters.”

Predictability will be difficult to repeat

“In closing, we believe that this was a logical evolution for both businesses. We feel we’ve been able to put together a transaction that didn’t risk the enterprise and still there is real room for value creation for investors. If you are an investor that wants the predictability that ICU has offered in recent years; that will be difficult to repeat over the near-term and into the medium term.”

We may hit some bumps

“As always, I’d like to close with things are moving fast. We are trying to improve the Company with urgency and we’re trying to take responsible action and break some of the inertia that many companies in our position face. We may hit some bumps as we take on some of this action and we will overcome and emerge stronger. I really appreciate the efforts of all ICU employees and our soon to be colleagues from Hospira Infusion Systems to adapt, move forward and focus on improving results, and our company appreciates the support we received from both our customers and our shareholders.’