Graham-Field’s acquisition of Fuqua resembles many hospital-based mergers

Graham-Field’s acquisition of Fuqua resembles many hospital-based mergers – Graham-Field Health Products Inc.; Fuqua Enterprises Inc

The $166 million stock acquisition of Atlanta-based Fuqua Enterprises Inc. by Graham-Field Health Products Inc., Hauppauge, N.Y., is further strong indication of consolidation among suppliers of products in the fast-growing, but fragmented home health care and skilled nursing facility business.

The deal appears to offer distinct synergies. Fuqua is involved in the design and interior furnishing of skilled nursing facilities, while Graham-Field sells a range of medical equipment to many of those same buyers. Graham-Field’s product lines feature wheelchairs, walkers, bathroom products and home care beds. Following approvals, the merger is expected to close in December. Graham-Field’s 1997 sales are expected to reach $260 million. Fuqua’s estimates of medical product sales are approximately $110 million.

The incentives that lead to mergers between home care suppliers is not much different than those on the hospital side of the supply business. Alison Cherney, a Brentwood, Tenn.-based home care industry consultant, says that the Graham-Field/Fuqua deal will bring together complementary product lines at a time when many manufacturers make moves that follow the lead of providers and broaden their offerings.

“Margins in the durable medical equipment business have been hit hard recently, especially in the area of reimbursements,” she said. “Combinations like these make sense because their idea is to make the surviving company more efficient and more attractive to its customers. There’s a strategic advantage for home health care providers in buying more products and services from a single supplier.”

The reimbursement situation, such as the recent 40% Medicare cuts in home oxygen payments, has led to lower margins and near dire consequences for some manufacturers. There have been rumors that two large DME producers recently cut their ties with a large, influential national trade group in an effort to save dues.

More mergers are certainly in the offing on the home health care side. For example, in mid-September, Sage Products Inc., Crystal Lake, Ill., a producer of a line of sharps disposal containers, acquired a mailback sharps disposal product line from OnGard Systems Inc., Hauppauge, N.Y. Similar to the Graham-Field/Fuqua agreement, Sage moved to boost its sales presence in the home care, physicians office and dental market. The mailback program allows small waste generators to pay a single price for a sharps container, containment bag, shipping carton, return U.S. Mail postage and final disposal at a designated medical waste facility.

With competition heightening, particularly from offshore sources, says Cherney, “the wheelchair, bed and furniture business is not as pretty as it used to be.”

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