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KENDALL SELLING McGAW LABORATORIES FOR $210 MIL.

Executive Summary

KENDALL SELLING McGAW LABORATORIES FOR $210 MIL. and "other considerations" to an investor group headed by former Caremark exec James Sweeney, under a definitive agreement announced July 27. Headquartered in Irvine, California, McGaw manufactures generic pharmaceuticals, I.V. solutions, pumps and controllers. The business accounted for about $225 mil. of privately held Kendall's 1989 sales of $900 mil. Financing is being provided by Alex. Brown & Sons of Baltimore, Maryland and New York-based Donaldson, Lufkin & Jenrette Securities. Sweeney, who was a founder and former chairman of home I.V. treatment provider Caremark before its acquisition by Baxter, will serve as McGaw CEO. According to Donaldson, Lufkin & Jenrette, no decisions have been made as to the rest of the McGaw management team. The sale is part of an ongoing restructuring by Kendall, a former Colgate subsidiary that was taken private in 1988 via a$960 mil. management-led leveraged buyout. Kendall announced in June that McGaw and the Futuro home health care division would be offered for sale to "reduce substantially or retire the company's bank debt." The McGaw divestiture also allows Kendall to "focus resources on specialty institutional health care markets, including wound care, vascular compression, critical care and urology." Kendall's remaining businesses will be reorganized around the Kendall Healthcare Products division, headquartered in Mansfield, Massachusetts. The decision to sell McGaw coincides with an increase in competition in the I.V. products market, which is now dominated by multi-billion dollar corporations such as Abbott and Baxter. Characterizing McGaw as an "excellent business," Kendall CEO Richard Gilleland remarked that "we are confident the company can flourish under the ownership of Mr. Sweeney's group."
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