18 Feb 2014
Machine vision and barcode scanner firm will add significantly to GSI's presence in the medical sector.
The transaction, expected to close by the end of March, pending the usual regulatory reviews and closing conditions, will give Massachusetts-headquartered GSI a more significant market position in the medical sector – one of its strategic priorities.
CEO John Roush said of the planned deal: "We are positioning GSI as a supplier of critical enabling technologies to major manufacturers of medical equipment.”
"Jadak is a leading supplier of camera-based technologies, which reduce medical errors and enhance safety in a wide range of medical equipment. The company has strong relationships with numerous leading medical OEM customers, many of whom are existing GSI customers.”
Roush is expecting the acquisition to add some $50 million in annual revenues for GSI, along with an adjusted pro forma earnings figure of $10 million. In May last year Jadak embarked on a 40,000 square foot expansion to its offices in North Syracuse, New York. In November, it agreed a collaboration with anti-counterfeiting specialist Zortag focused on healthcare products.
According to GSI, the medical applications served by Jadak's products either overlap or are adjacent to many of its own existing ones, and it is hoped that the expanded product offerings combined with a number of common customers will help GSI to strengthen some key OEM relationships.
The Jadak technology comprises a combination of optical and non-optical products, ranging from barcode components and scanners to machine vision cameras, as well as RFID technology, magnetic stripe readers and associated software.
Reducing medical errors
According to GSI, Jadak has doubled its revenue over the last five years, through a combination of market growth as adoption of the technology grows across a wider range of medical equipment, and through increases in Jadak's penetration of these applications.
"Jadak is a leader in the industry in providing medical OEMs with the technology they need to reduce medical errors, increase patient safety and improve the efficiency of healthcare across a broad spectrum of applications and procedures," Roush said.
"The Jadak management team has done a tremendous job of building a great company, and we are pleased to have them join the GSI team. With more than $170 million of GSI's pro forma revenue expected to come from the medical market, the acquisition will be a significant step for us in achieving our strategic goals.”
Jadak's CEO David Miller added: “The two companies have very similar business models, customer bases and technology approaches. We are excited about our shared future and we welcome GSI's commitment to help us achieve our goals."
GSI, which over the past few years has undergone a major overhaul of its business strategy to reduce its net debt position, is financing this latest acquisition with a combination of cash on hand and an expanded $175 million credit facility recently agreed with lenders Bank of America, the Silicon Valley Bank, HSBC, JPMorgan Chase and others.
In addition to the $93.5 million purchase price, GSI is to grant an aggregate 180,000 shares to the four owner-managers of Jadak, which will be eligible to vest after two years - provided that certain financial targets are met.
Assuming that the deal goes ahead as planned, GSI should end the first quarter of 2014 with around $140 million of gross debt, and slightly more than $100 million of net debt.
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