ICU Medical Inc. (ICUI), the San Clemente, California-based producer of intravenous medical equipment, is weighing a sale that may fetch more than $1 billion, said people familiar with the matter. The shares rose to their highest closing price since first being sold to the public 21 years ago.
ICU is working with JPMorgan Chase & Co. (JPM) on finding suitors, according to the people, who asked not to be named as the process is private. Deliberations are in the early stages and the company is still gauging interest, the people said.
Among the chief beneficiaries of a sale may be Chief Executive Officer George Lopez, the founder and ICU’s top holder with an 11 percent stake, according to data compiled by Bloomberg. ICU got its start almost 30 years ago, when Lopez began working on a device to prevent IV lines from accidentally disconnecting, the corporate website shows.
The buyer is just as likely to be a private-equity investor as another health-care company, said Lawrence Solow, an analyst with CJS Securities Inc. in White Plains, New York. “To try and fit it strategically, it’s hard to say who it would be,” he said. “There’s nobody that lines up with their markets.”
A large medical device and supply company might also be interested, Solow said in a telephone interview. Solow, who has a market outperform rating on the shares, declined to name any possible bidders.
Tom McCall, a spokesman for ICU, said he had no immediate comment, while a spokeswoman at JPMorgan declined to comment.
ICU climbed 13 percent to $68.83 at the close in New York, its biggest one-day increase since October 2008. The stock has gained 30 percent over the past year, compared with a 22 percent increase for the Standard & Poor’s 600 Smallcap Index.
The company generated about $315 million in revenue last year. Its biggest product line is devices used in drug infusions, including equipment that connects a patient’s intravenous port to a drug or solution. The company also makes storage, compounding and delivery systems for often-toxic cancer drugs, and sells them to drugmakers and hospitals.
ICU also carries a growing amount of cash on its balance sheet, $155 million in the first quarter. That cash generation may make it even more attractive to a private-equity target, Solow said. He called the $1 billion potential price, not including the cash, “a feasible valuation.”
One of ICU’s biggest products is a connector called the Clave, which makes up about a third of its sales, according to a March 7 research report by Piper Jaffray Cos. The equipment lets doctors or nurses attach the feed from a nutrition or saline bag, or a dose of medicine, into a patient’s IV port, using a sterile, needle-free connection.
Hospira Inc. (HSP), a drugmaker that focuses on difficult-to-make-and-store drugs, is one of ICU’s biggest customers. Sales to the company made up about a third of revenue during the first quarter, ICU Chief Financial Officer Scott Lamb said on an April 22 conference call.