Cantel Medical Acquires Crosstex International

question 91

Essay

Cantel Medical Acquires Crosstex International
On August 3, 2005, Cantel Medical Corporation (Cantel), as part of its strategic plan to expand its infection prevention and control business, announced that it had completed the acquisition of Crosstex International Incorporated (Crosstex). Cantel is a leading provider of infection prevention and control products. Crosstex is a privately owned manufacturer and reseller of single-use infection control products used primarily in the dental market.
As a consequence of the transaction, Crosstex became a wholly owned subsidiary of Cantel, a publicly traded firm. For the fiscal year ended April 30, 2005, Crosstex reported revenues of approximately $47.4 million and pretax income of $6.3 million. The purchase price, which is subject to adjustment for the net asset value at July 31, 2005, was $74.2 million, comprising $67.4 million in cash and 384,821 shares of Cantel stock (valued at $6.8 million). Furthermore, Crosstex shareholders could earn another $12 million payable over three years based on future operating income. Each of the three principal executives of Crosstex entered into a three-year employment agreement.
James P. Reilly, president and CEO of Cantel, stated, "We continue to pursue our strategy of acquiring branded niche leaders and expanding in the burgeoning area of infection prevention and control. Crosstex has a reputation for quality branded products and seasoned management." Richard Allen Orofino, Crosstex's president, noted, "We have built Crosstex over the past 50 years as a family business and we continue growing with our proven formula for success. However, with so many opportunities in our sights, we believe Cantel is the perfect partner to aid us in accelerating our growth plans."
-What do you believe could have been the primary factors causing Crosstex to accept Cantel's offer?

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Definitions:

Draw Key

A type of key, often made of metal, used to secure components together by fitting into a corresponding slot or recess, commonly found in mechanical and engineering applications.

Jam Nut

A type of thin nut used to lock another nut by being tightened against it, mainly in situations where vibration might loosen the nuts.

Kingpin

A central pivot in the steering mechanism of a vehicle, crucial for the steering system.

Snap Rings

Retaining rings inserted into a groove to hold components in assembly, often used in mechanical devices to secure parts in place.