Cardiac Science (NASDAQ:DFIB)
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Cardiac Science and Quinton Cardiology Systems Announce Signing
of Definitive Merger Agreement
Combined Company Will Provide Leading Cardiology Devices in Multiple Markets
and Achieve Significant Cost Savings
IRVINE, Calif., and BOTHELL, Wash., Feb. 28 /PRNewswire-FirstCall/ -- Cardiac
Science, Inc. (NASDAQ:DFIB), a leading manufacturer of life-saving automatic
public-access defibrillators, and Quinton Cardiology Systems, Inc.
(NASDAQ:QUIN), a global leader in advanced cardiology products, today announced
the signing of a definitive merger agreement. The transaction will combine
their respective strengths in development, manufacturing and marketing of
cardiology devices, services and supplies and create a diversified,
well-capitalized medical technology growth company with a broad portfolio of
cardiology-related products, including the prominent brand names Burdick(R),
Quinton(R), and Powerheart(R). The companies have similar missions, business
models, technology expertise and operational processes and will continue to
focus on supplying cardiology products and services on a global basis to
hospitals, physician's offices, and public places.
The transaction was unanimously approved by the boards of directors of both
companies and is anticipated to close during the third quarter of 2005, subject
to regulatory review, the approval of its respective shareholders and other
customary closing conditions. The new management team, comprised of executives
from both companies, will be led by John R. Hinson, Quinton's current President
and Chief Executive Officer, and Michael K. Matysik, Quinton's current Chief
Financial Officer, who will each continue in those roles for the combined
company. Raymond W. Cohen, Cardiac Science's current Chairman and Chief
Executive Officer, will serve as Chairman of the Board of Directors and Dr.
Ruediger Naumann-Etienne, Quinton's current Chairman, will serve as
Vice-Chairman. The nine member board, which will include five independent
members, will be comprised of five current Quinton directors and four current
Cardiac Science directors.
Merger Highlights
Business
* Continued focus on the management of cardiac disease
* Attractive blend of higher growth and more predictable revenue streams
* Enhanced distribution access to U.S. medical and international markets
* Complementary technology development and service activities
Financial
* Estimated $10 million in annual operating expense savings
* Elimination of $9 million in annual interest expense
* Anticipated post-merger cash tax savings of at least $4 million
annually
* Significantly stronger balance sheet, with no long-term debt
Management Comments
Quinton President and Chief Executive Officer John R. Hinson said, "Cardiac
Science has demonstrated excellent growth during the past several years by
leveraging its intellectual property position to achieve leadership in the
fast-growing public-access defibrillation market. We believe the combination
of Quinton and Cardiac Science will yield significant operational, product
development and marketing synergies. With a well-established global presence,
millions in cost savings and a balance sheet free of long-term debt, we expect
the new company to be well-positioned to achieve significantly greater size and
scale."
Cardiac Science Chairman and Chief Executive Officer Raymond W. Cohen
commented, "Quinton has one of the most recognized names in cardiac monitoring
with a half-century history of delivering high quality products and service,
and has earned the respect of physicians, hospitals and medical products
distributors worldwide through its commitment to customers. The specific
experience of their management team in successfully positioning companies in
the cardiology space for growth and profitability, as evidenced by their
transformation of both Quinton and Burdick, will help take the new company to
the next level."
Terms of the Merger
Under the terms of the merger agreement, the parties have formed a new holding
company, and upon the closing of the transaction, the shareholders of each
company will receive common stock of the new holding company in exchange for
their shares. The new holding company will be named Cardiac Science
Corporation and upon approval by the Nasdaq, will have its shares traded on the
Nasdaq National Market under the symbol "DFIB."
The agreement calls for each Cardiac Science shareholder to receive 0.10 of a
share of common stock of the new company for each share of Cardiac Science
common stock owned and each Quinton shareholder to receive approximately 0.77
of a share of common stock of the new holding company for each share of Quinton
common stock owned. The number of all Cardiac Science and Quinton stock
options and warrants outstanding at the effective time of the transaction, as
well as their respective exercise prices, will be adjusted in accordance with
the same exchange ratios.
In connection with the transaction, Cardiac Science's senior note holders have
agreed to exchange the entire balance of principal and accrued interest under
such notes, or approximately $61 million, as well as warrants to purchase
approximately 13.4 million shares of Cardiac Science common stock, for an
aggregate of $20 million in cash and $53.75 million, or approximately 13
percent, of the new holding company's common stock. As a result, the new
holding company will have no long term debt immediately following the closing.
Cash consideration paid to the senior note holders will come from existing cash
on the combined company's balance sheet.
Immediately following the close of the transaction, the new holding company
will have 22.3 million shares of common stock issued and outstanding, including
shares issued to Cardiac Science's senior note holders. Based on the exchange
ratios set forth above, Cardiac Science's shareholders, together with the
senior note holders, will own approximately 51 percent, and Quinton's
shareholders will own approximately 49 percent, of the total issued and
outstanding shares of common stock of the new holding company immediately
following the closing.
Attractive Markets
The combined company will be competing in markets which provide attractive
growth opportunities. According to published industry reports and management
estimates, the annual demand for diagnostic cardiology systems, services and
supplies is currently estimated to be at least $1 billion and is expected to
grow in the mid-single digits, while the worldwide external defibrillator
market is currently estimated at $800 million. Currently, the public-access
defibrillator market segment accounts for approximately $275 million and is
expected to grow at double digit rates to $900 million by 2010.
Sales, Distribution and Service
In the U.S., the combined company will have more than 100 direct sales
personnel calling on hospitals, physician offices, corporations,
municipalities, schools, fire and police departments, and the military. In
addition, there will be over 200 service personnel providing training,
installation and support services. Internationally, the combined company will
have independent distributors in over 90 countries around the world, along with
direct operations in the United Kingdom.
The companies have strategic distribution relationships with some of the
largest and most respected distribution organizations in the world including
PSS World Medical, Airgas, Concentra Health Services, Henry Schein and
McKesson. Cardiac Science also manufactures products on an OEM basis for GE
Healthcare, and both companies provide products for Japan's largest medical
device company, Nihon Kohden Corporation.
Manufacturing, R&D and Administration
Cardiac Science's corporate and manufacturing functions will be integrated into
the current Quinton facilities in Bothell, Washington and Deerfield, Wisconsin,
respectively. Defibrillator product development and certain sales, marketing
and training service functions will be integrated into one facility in Lake
Forest, California.
Financial Guidance
Quinton Chief Financial Officer Michael K. Matysik stated, "The pro forma
combined revenues for the two companies, if they were together for all of 2005,
would be expected to be in the range of $170 to $180 million. In 2006 and
beyond, we expect revenue to increase in double digit percentage terms." Mr.
Matysik added, "Excluding one time merger related costs and integration
expenses, the new company is expected to be immediately profitable and generate
positive operating cash flow. With integration activities completed by the end
of 2005, both profits and operating cash flows of the combined company in 2006
are expected to be substantially more than would have been achievable if the
two companies were operating independently, given $10 million in estimated
operating cost synergies and the additional savings of nearly $9 million in
interest charges."
Financial Advisors for the Transaction
Sun Trust Robinson Humphrey acted as sole financial advisor to Quinton in the
transaction. CIBC World Markets acted as sole financial advisor to Cardiac
Science in the transaction.
Investor Conference Call
The management teams of Quinton and Cardiac Science will host a joint
conference call to discuss the merger tomorrow, March 1, 2005 at 9:45 a.m.
Eastern Standard Time. The conference call will be web cast and available from
both the Quinton and Cardiac Science web sites. Web participants are
encouraged to go to either http://www.quinton.com/ or
http://www.cardiacscience.com/ at least 15 minutes prior to the start of the
call to register, download and install any necessary software. An archive of
the call can also be accessed at these sites within 48-hours after the
conclusion of the event and will be available for a period of two weeks
thereafter.
About Quinton Cardiology Systems
Quinton, with operations in Bothell, WA, Deerfield, WI and Shanghai, China,
develops, manufactures, markets and services a family of advanced cardiology
products such as electrocardiographs, cardiac stress test systems, Holter
monitors, cardiac rehabilitation telemetry systems, and cardiology data
management systems used in the diagnosis, monitoring and management of patients
with cardiovascular disease. Quinton markets its products under the Quinton(R)
and Burdick(R) brand names. In the U.S., Quinton products are sold to
hospitals and the physician office market through a 55-person sales
organization, as well as through multiple national and regional distributors.
Internationally, Quinton products are marketed by independent distributors in
over 90 countries around the world. In 2004, Quinton was recognized by the
Puget Sound Business Journal as one of the ten fastest growing public companies
in Washington State. For more information, please visit
http://www.quinton.com/ or contact Quinton at (425) 402-2009.
About Cardiac Science
Cardiac Science, with operations in Irvine and Lake Forest, CA, Minneapolis,
MN, Manchester, England and Copenhagen, Denmark, develops, manufactures and
markets Powerheart(R)-brand automatic public-access defibrillators (AEDs) and
offers comprehensive AED/CPR training and AED program management services that
facilitate successful deployments. The Company also makes the Powerheart(R)
CRM(TM), the only FDA-cleared therapeutic patient monitor that instantly and
automatically treats hospitalized cardiac patients who suffer life-threatening
heart rhythms. In the U.S., Cardiac Science products are sold to corporations,
police and fire departments, state and local municipalities, the federal
government and schools by its 55-person direct sales force, and certain
national and local distributors. Internationally, Cardiac Science products are
sold direct in the United Kingdom and by independent distributors in over 50
countries. Cardiac Science also manufactures its AED products on a private
label basis for other leading medical companies such as Quinton Cardiology
Systems, Nihon Kohden (Japan) and GE Healthcare. In 2004, Cardiac Science was
recognized by Deloitte & Touche as the 4th fastest growing technology company
in North America and as the fastest growing company in Orange County, CA. For
more information, please visit http://www.cardiacscience.com/ or contact
Cardiac Science at (949) 797-3800.
Where to Find Additional Information about the Merger
Under the terms of the merger agreement, the parties have formed a new
corporation, CSQ Holding Company and with two wholly-owned acquisition
subsidiaries that will merge with and into Quinton Cardiology Systems, Inc and
Cardiac Science, Inc. respectively. As part of the transaction, Quinton will
also merge into CSQ Holding Company. Cardiac Science and Quinton intend to
cause CSQ Holding Company to file a registration statement on Form S-4
containing a proxy statement/prospectus in connection with the merger
transaction. Investors and security holders are urged to read this filing when
it becomes available because it will contain important information about the
transaction. Investors and security holders may obtain free copies of these
documents (when they are available) and other documents filed with the
Securities and Exchange Commission at the Securities and Exchange Commission's
web site at http://www.sec.gov/. In addition, investors and security holders
may obtain free copies of the documents filed with the Securities and Exchange
Commission by Cardiac Science by contacting Cardiac Science Investor Relations
at (949)-474-4300. Investors and security holders may obtain free copies of
the documents filed with the Securities and Exchange Commission by Quinton by
contacting Quinton Investor Relations at (425) 402-2009.
Cardiac Science and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of Cardiac
Science in connection with the mergers. Information regarding the special
interests of these directors and executive officers in the transaction
described herein will be included in the proxy statement/prospectus of Cardiac
Science and Quinton described above. Additional information regarding the
directors and executive officers of Cardiac Science is also included in the
Cardiac Science proxy statement for its 2004 Annual Meeting of Stockholders,
which was filed with the Securities and Exchange Commission on or about
November 22, 2004. This document is available free of charge at the Securities
and Exchange Commission's web site at http://www.sec.gov/ and from Cardiac
Science by contacting Cardiac Science Investor Relations at (949) 474-4300.
Quinton and its directors and executive officers also may be deemed to be
participants in the solicitation of proxies from the stockholders of Quinton in
connection with the mergers. Information regarding the special interests of
these directors and executive officers in the transaction described herein will
be included in the proxy statement/prospectus of Cardiac Science and Quinton
described above. Additional information regarding these directors and
executive officers is also included in Quinton's proxy statement for its 2004
Annual Meeting of Stockholders, which was filed with the Securities and
Exchange Commission on or about April 14, 2004. This document is available
free of charge at the Securities and Exchange Commission's web site at
http://www.sec.gov/ and from Quinton by contacting Quinton Investor Relations
at (425) 402-2009.
This press release includes forward-looking statements. These statements may be
identified by the use of forward-looking terminology such as "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intend," "may," "might,"
"plan," "potential," "predict," "should," or "will," or the negative thereof or
other variations thereon or comparable terminology. In particular,
forward-looking statements include, without limitation, statements related to
the expected synergies of the combined companies, the anticipated cost savings
resulting from the business combination, the ability of the combined company to
achieve significantly greater size and scale, the ability of the combined
company to achieve sustainable profitability and to continue to develop
competitive new products, the timing of the completion of the proposed business
combination, the pro forma combined revenues for the two companies and all
other statements under the heading "Financial Guidance". Quinton and Cardiac
Science have based these forward-looking statements on the current
expectations, assumptions, estimates and projections. While Quinton and Cardiac
Science believe these expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions and involve
known and unknown risks and uncertainties, many of which are beyond our
control. These risks include: the risk that the combined company may not
achieve the benefits expected from the transaction, which may have a material
adverse effect on the combined company's business and could result in loss of
key personnel, the risk that the transaction may be completed even though
material adverse changes may result from the announcement of the transaction,
industry-wide changes and other causes, the risk that the combined company may
not be able to develop new competitive products and the risk that the
transaction may not be completed or that the closing of the transaction may be
delayed due to failure to obtain regulatory or other approvals or the
occurrence of a material adverse change in one or both of the parties. These
and other important factors, including those discussed in Quinton's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004, under the heading
"Certain Factors That May Affect Future Results," and in Cardiac Sciences'
Prospectus dated February 7, 2005, filed pursuant to Rule 424b(3), under the
heading "Risk Factors," may cause the actual results, performance or
achievements to differ materially from any future results, performance or
achievements expressed or implied by these forward-looking statements. Given
these risks and uncertainties, you are cautioned not to place undue reliance on
such forward-looking statements. We do not undertake any obligation to update
any such statements or to publicly announce the results of any revisions to any
such statements to reflect future events or developments.
For Cardiac Science Investors
Matt Clawson (Investors)
Len Hall (Media)
Allen & Caron Inc
(949) 474-4300
Cardiac Science
Roderick de Greef
EVP and CFO
(949) 797-3800
Quinton Cardiology Systems
Mike Matysik
Sr. Vice President and CFO
(425) 402-2009
DATASOURCE: Cardiac Science, Inc.; Quinton Cardiology Systems, Inc.
CONTACT: Investors, Matt Clawson, or Media, Len Hall, both of Allen &
Caron Inc, +1-949-474-4300, for Cardiac Science Investors; or Roderick de
Greef, EVP and CFO of Cardiac Science, +1-949-797-3800; or Mike Matysik, Sr.
Vice President and CFO of Quinton Cardiology Systems, +1-425-402-2009
Web site: http://www.quinton.com/
Web site: http://www.cardiacscience.com/