AP News, January 10th, 2007
Eastman Kodak Co. said Wednesday it will sell its health imaging business to Onex Healthcare Holdings Inc., a subsidiary of Canadian investment company Onex Corp., for up to $2.55 billion.
Created a year after the discovery of X-ray film in 1895, the unit accounts for nearly one-fifth of Kodak's overall sales but its operating profit plunged 21 percent last year as margins tightened. Kodak plans to use the proceeds to repay about $1.15 billion of secured term debt and for other undisclosed purposes.
The sale comes as the iconic photographic products company scrambles to generate larger profits from digital photography as its storied film business erodes. It has reported two straight years of quarterly losses.
About 8,100 employees associated with the health group, which makes X-ray film, medical printers and information management software and storage systems, will continue with the business, Kodak said. The deal is expected to close in the first half of this year.
Kodak's competitors in health imaging include General Electric Co.'s GE Healthcare, Siemens AG and Philips Electronics NV.
In May, Kodak hired Goldman Sachs & Co. to help it explore alternatives for the unit. Analysts had expected it to be sold outright for anywhere from $2 billion to $4 billion, dismantled and sold in pieces, or turned into a joint venture.
Under terms of the deal, Kodak will receive $2.35 billion in cash at closing, and up to an additional $200 million in future payments if Onex Healthcare investors realize an internal rate of return of more than 25 percent of their investment.
Kodak expects to use proceeds from the deal to repay about $1.15 billion of secured term debt and for other undisclosed purposes.
Kodak shares rose 2 cents to $25.65 in premarket trading.
As Kodak enters a fourth year in its historic makeover, it has accumulated $2 billion in net losses over the last eight quarters and piled up $2.6 billion in restructuring charges since January 2004.
Its losses narrowed to $37 million in the July-to-September period as digital profits surged above $100 million. It posts fourth-quarter earnings on Jan. 31.
In trimming manufacturing operations and axing up to 27,000 jobs, Kodak's global work force has dipped below 50,000 from a peak of 145,300 in 1988.
___
On the Net:
http://www.kodak.com
