Business Context and Reporting Period
This Form 8-K Current Report, dated May 1, 2017, details Varex Imaging Corporation's completion of a strategic acquisition. The report covers the closing of the transaction on May 1, 2017, involving the purchase of PerkinElmer Inc.'s Medical Imaging business.
Key Financial Metrics and Transaction Details
- Acquisition Price: Approximately $276 million in cash.
- Target Business: PerkinElmer Medical Holdings, Inc., Dexela Limited, and related assets (digital flat panel X-ray detectors).
- Target Workforce: Approximately 280 employees.
- Financing Structure:
- Term Facility: $400 million secured term loan (5-year term).
- Revolving Credit Facility: Up to $200 million (5-year term); approximately $97 million drawn to fund the deal.
- Interest Rates: LIBOR plus 1.75% - 2.75% or Base Rate plus 0.75% - 1.75%.
- Debt Repayment: Proceeds were used to pay the purchase price, fees, and repay all obligations under the Previous Credit Agreement dated January 25, 2017.
Material Changes Versus Prior Period
The primary material change is the expansion of Varex's operations through the acquisition of PerkinElmer's Medical Imaging business, adding significant assets and 280 employees. Concurrently, Varex replaced its previous credit agreement with a new, larger credit facility totaling $600 million in aggregate principal capacity ($400 million term + $200 million revolver) to fund the transaction and refinance prior debt.
Management Commentary, Risks, and Unusual Items
- Management Changes: Effective May 2, 2017, Dr. Brian Giambattista (former President of PKI's Medical Imaging business) was appointed Senior Vice President and General Manager, X-ray Detectors. Richard E. Colbeth was promoted to Senior Vice President of Engineering, X-ray Detectors.
- Covenants and Risks: The new Credit Agreement includes restrictive covenants limiting additional indebtedness, liens, sale-leaseback transactions, and fundamental changes. It also mandates the maintenance of specific financial ratios.
- Financial Statements: The filing does not provide immediate financial statements or pro forma information for the acquired business; these are scheduled to be filed by amendment within 71 calendar days.
Investor Verification Checklist
- Verify the final purchase price allocation and goodwill implications once the financial statements are filed within 71 days.
- Review the specific financial covenants in the new Credit Agreement to assess leverage constraints.
- Monitor the integration progress of the 280 new employees and the Santa Clara, Germany, Netherlands, and UK operations.
- Confirm the interest rate environment impact on the variable-rate debt (LIBOR/Base Rate plus margins).