Gelman Signs Merger Deal With Memtec

Gelman signs merger deal with Memtec

JUL 2 3 1996

■ Deal with Australian firm won’t result in layoffs or relocation, say officials.

By RUSSELL GRANTHAM

NEWS STAFF REPORTER

Gelman Sciences Inc, and Memtec Ltd., an Australian industrial and medical filter manufacturer, said they have signed a tentative merger deal that will make the combined companies the third or fourth largest filtration manufacturer in the world.

Officials with both companies said the planned stock swap deal, valued at about $283 million at Monday’s closing stock market prices, is not expected to lead to employee layoffs or the relocation of Gelman's Ann Arbor-based plant and headquarters to Australia. The deal is expected to close by year’s end.

“There are absolutely no, quote unquote, layoffs anticipated,” said Memtec Chairman Denis M. Hanley, although he said “restructuring” could affect some of the combined companies’ operations, such as centralized accounting for the two publicly held companies.

“There is absolutely no intention of moving any activities currently ongoing in Ann Arbor to Australia,” added Hanley, calling Ann Arbor “one of the nicest places on earth.”

“You’d be mad” to move the 850-employee company’s Ann Arbor operations, he said. Hanley said the planned merger will also have no effect of Gelman’s $1.25 million expansion of its 150-employee Pensacola. Fla., membrane filter plant, now underway.

Gelman Sciences President Kim Davis said the two companies’ combined operations in North and South America, Europe and Asia will have very little overlap.

“I believe that this is a transaction that really builds on Gelman’s strengths,” he said.

Hanley said eliminating duplication of some functions at the two publicly traded companies is expected to save about $4 million-$5 million a year too small a savings to be driving the merger.

The main reasons for the merger, he said, are growing competition in the consolidating filter manufacturing industry, and a chance to use Gelman’s profitable, slower-growing health care and laboratory products to help finance Memtec’s growth.

“We see this combination as really making the company,” he said.

The 1,500-employee company, based in Windsor, Australia, makes several lines of metallic, membrane and fiber-based filters for electronics, automotive, chemical, food, electric utility and other industrial uses, medical applications, and water treatment.

Hanley projected that the merged companies will have combined sales “in excess of $400 million next year.” Currently, Memtec’s annual sales are running at about $270 million and Gelman’s at $120 million, he estimated.

Hanley and Davis said the two companies chose to combine after Gelman’s 64-year-old chairman and founder, Charles Gelman, said he planned to retire. Gelman owns about 17 percent of the company.

Likewise, Memtec recently acquired Seitz, a German filter manufacturer, under the same circumstances, Said Hanley. “Again, it was the owner getting into the retirement stage,” he said.

“We believe that the combination of Memtec’s exceptional worldwide purification and separation business, with Gelman’s strong micro-filtration and membrane business, will create a company with continuing prospects for strong growth,” Gelman said in a written statement.

“This merger significantly enhances Gelman’s long-range growth prospects. It opens new doors that will enable Gelman to further expand in the United States and international markets,” Gelman said.

Last week, Gelman Sciences’ shares climbed almost 40 percent, to $26.75 a share, after the company said it had hired an investment banking firm to evaluate merger offers from several unnamed potential buyers.

Davis said last week’s trading in

company to announce the merger talks. “We felt that we needed to make some sort of disclosure.” he said.

Monday, Gelman’s shares (GSC) closed on the American Stock Exchange at $29,125 per share, up $2,375 from Friday’s close, but still below the roughly $35-per-share value the tentative deal is pegged to.

Hanley said the agreement calls for Gelman shareholders to receive one Memtec American Depository Share for each Gelman share if the Australian company’s American-traded shares average $35 or more before the deal is closed. Gelman shareholders will get 1.05 Memtec shares if its market price is $30-$35, and enough Memtec shares to equal $33 per Gelman share at lower prices, he said.

If Memtec's share price falls below $28, Gelman has the right to call off the deal after both companies pay “breakup fees” to each other, he said. He didn’t disclose the amount of the fees.

Monday, Memtec's American Depository Shares (MMTCY) closed at $32.50 on the Nasdaq exchange, down 50 cents.

Company officials said they expect to sign a definitive agreement in about four weeks. They said the transaction is subject to approval of Gelman and Memtec shareholders:

TEAMING UP

Sales (millions) by year and geographic region:

MEMTEC LTD. Americas Europe Pacific Total
1995 na na na na
1994 $53.5 $24.3 $37.3 $115.1
1993 43.0 23.4 34.8 101.1
1992 39.4 21.3 33.6 94.3

GELMAN SCIENCES
1995 $88.0 16.5 8.1 $103.5.
1994 80.1 13.6 9.3 95.0
1993 72.6 10.6 9.0 86.2'
1992 65.7 9.8 105 81.5