Kimberly-Clark Acquires I-Flow Corp.

Kimberly-Clark Corporation and I-Flow Corporation, a healthcare company that develops and markets technically advanced, low-cost drug delivery systems and innovative products for post-surgical pain relief and surgical site care, have announced a definitive agreement whereby I-Flow will be acquired in a cash tender offer for approximately $324 million on a fully diluted basis.

The total transaction value, which is net of acquired cash and cash equivalents, is about $276 million. I-Flow will operate as part of Kimberly-Clark Health Care, a global business segment of Kimberly-Clark Corporation, with net sales of more than $1 billion, and a leading provider of infection control solutions, surgical solutions, and medical devices for pain management, respiratory and digestive health.

Founded in 1985, I-Flow Corporation is a leader and innovator in pain management and drug delivery technology for physicians and their patients. I-Flow’s suite of pain management products, led by its flagship line, the ON-Q® Pain Relief System (ON-Q), provides reliable and simple non-narcotic, regional anesthesia therapies that redefine post-surgical recovery by eliminating many of the side effects customarily associated with narcotics.  Clinical studies have shown that patients who receive ON-Q generally get back to normal faster after surgery, which results in shorter hospital stays, reduced costs and higher patient satisfaction.  I-Flow has approximately 1,260 employees and reported net sales of about $133 million for the fiscal year ended Dec. 31, 2008.

“The acquisition of I-Flow is consistent with our global business plan strategy to expand our Health Care business to include higher-growth, higher-margin medical devices,” said Joanne Bauer, president of Kimberly-Clark Health Care.  “I-Flow will increase our medical device sales by more than 50 percent, add an innovative and successful technology to our growing portfolio of pain management and surgical solution products, and strengthen the depth and breadth of our sales force.  Moreover, I-Flow has a solid track record of generating strong sales growth and healthy gross margins.”

“Combining forces with a global leader such as Kimberly-Clark Health Care will enable future growth, and provide a platform to more broadly deliver pain relief and surgical site care, which is important for patients, physicians and healthcare providers,” said Donald M. Earhart, chairman and chief executive officer of I-Flow.

Under the terms of the agreement, Kimberly-Clark will commence a tender offer to purchase all outstanding shares of I-Flow at $12.65 per share. The tender offer price represents a 31 percent premium to I-Flow’s most recent 60-day average share price and is conditioned on the tender of a majority of the outstanding shares of I-Flow’s common stock, calculated on a fully diluted basis. The Boards of Directors of both companies have unanimously approved the transaction. The transaction is expected to close in the fourth quarter of 2009, subject to customary closing conditions, including expiration of the waiting period under the Hart-Scott-Rodino Act and other foreign regulatory approvals.  

Upon closing, the transaction is expected to be modestly dilutive to Kimberly-Clark’s 2009 and 2010 earnings per share and accretive beginning in 2011.

This announcement represents the second acquisition that Kimberly-Clark Health Care has made in 2009 to further accelerate the growth of its medical device business. Recently the company announced it acquired the pain management business of Montreal-based Baylis Medical Company. 

Goldman, Sachs & Co. acted as exclusive financial advisor to I-Flow. Citi served as exclusive financial advisor to Kimberly-Clark.