The president of Eastman Kodak Co.'s health unit said Wednesday that Canadian conglomerate Onex Corp.'s pending acquisition is a good one for the White City imaging plant's 400 employees.
Kevin Hobert, in a telephone interview from his office in Rochester, N.Y., said both the product now produced and the ability to manufacture new lines bode well for the 40-year-old plant.
"This is a great thing for the health image group and White City," Hobert said. "It's an outstanding factory and a very important part of our business. This transaction opens up levels of flexibility and opens up new opportunities."
What specific opportunities, Hobert declined to say. But the financial muscle of the Onex conglomerate is likely to afford the ability to develop new lines in time.
"There are still many, many opportunities for growth supporting the products we make. It's a great chemical coating plant and there are other things we can do with the product. There's a good return on the product, there's business to go after and Onex will be supportive."
The White City plant was part of a deal worth up to $2.55 billion that was announced Wednesday morning. Bruno Mary, who has been at the local operation for five years and plant manager for about two months, said the site's 400 employees were notified of the transaction when they arrived at work.
Kodak announced last May that it had hired Goldman Sachs to seek alternatives for the health unit, which makes products such as X-ray films and medical printers. The unit produced $2.54 billion in sales for the 12 months ending Sept. 30, or nearly one-fifth of Kodak's overall business.
Kodak said all of the 8,100 employees associated with the health group will remain following the closing of the deal, which includes manufacturing sites in Colorado and overseas, and an office building in Rochester. The deal is expected to close in the first half of this year.
According to a release announcing the deal, Onex Healthcare Holdings Inc., a unit of the Canadian investment company, will pay $2.35 billion plus up to $200 million in additional future payments if Onex realizes an internal rate of return of more than 25 percent on its investment. Kodak anticipates using proceeds from the deal to repay $1.15 billion of debt and invest in its digital photography and film printing.
Kodak is transforming itself in response to consumers shifting to digital photography from film by cutting jobs and shedding assets. Nonetheless, Kodak has posted eight consecutive quarterly losses, due to restructuring costs and plunging film sales. The health group's earnings declined 29 percent to $68 million from the year-earlier period as a result of higher silver prices and costs tied to research and development.
Last month, Kodak said its health group raised prices 8 percent to 12 percent on all medical-imaging films and related supplies, citing high costs for materials including silver.
"Some of our markets are growing and others are declining," Hobert said.
"The White City plant has done a great job of driving productivity and has incremental capacity beyond what is needed to serve market. We're looking for other uses and this gives us greater levels of flexibility."
Onex is among Canada's largest conglomerates, with companies ranging from airline manufacturing to health care. The private-equity firm said last month it and an affiliate of Goldman Sachs Group Inc. will purchase Raytheon Co.'s aircraft business for about $3.3 billion. Onex said in a release its large-cap private equity fund, Onex Partners, would make an equity investment of $475 million to complete the Kodak unit acquisition. Onex Corp.'s investment is expected to be $188 million.
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