Owens & Minor signs definitive agreement to acquire Medical Action Industries

Owens & Minor, Inc. (NYSE: OMI), a leading healthcare logistics company, and Medical Action Industries Inc. (Nasdaq: MDCI), a leading producer of custom procedure trays (CPTs) and minor procedure kits, announced today that the two companies have signed a definitive agreement under which Owens & Minor will acquire all outstanding shares of Medical Action for $13.80 per share in cash, representing a total transaction value of approximately $208 million, including assumed debt, net of cash. Medical Action reported $287.8 million in net sales from continuing operations for the fiscal year ended March 31, 2014, of which approximately 45% represented sales to Owens & Minor. Owens & Minor expects that the transaction will be accretive to non-GAAP net income per diluted share in 2015 and beyond.

Upon completion of the acquisition, Owens & Minor will significantly advance its strategy of Connecting the World of Medical Products to the Point of Care^TM by broadening its service offering to provider and manufacturer customers. Owens & Minor believes the combined platform will offer the following enhancements:

• Medical Action's strong tray assembly capabilities complement Owens & Minor's existing ability to provide unitized delivery services to the provider market. By assembling and delivering procedure-specific products to the point of care, Owens & Minor's unitized delivery services significantly improve the ability of provider customers to track, control and reduce procedure costs.
• Owens & Minor's leadership position in medical supply logistics coupled with Medical Action's dedicated clinical sales force creates opportunities for enhanced growth in the domestic kit and tray market.
• Medical Action's CPT strategy of providing product choice and flexibility for providers is complementary to Owens & Minor's logistics-focused supply chain services, where product choice is highly valued.
• The acquisition also enhances Owens & Minor's partnerships with manufacturers by providing continued market access and more robust opportunities to deliver their products directly to the patient through Owens & Minor's unitized services.

"The acquisition of Medical Action is consistent with our strategic focus and a natural extension of Owens & Minor's core capabilities as we look to broaden our service offering," said Craig R. Smith, chairman and chief executive officer of Owens & Minor. "It meets the needs of both our provider and manufacturer customers by providing them a more complete and cost-effective solution for the delivery of procedure-specific product kits. With attractive margins and a strong competitive position, we expect this transaction to create value for shareholders and establish a scalable platform for future growth."

"We have a long and productive history working with Medical Action as their largest channel partner and understand the organization well," said James L. Bierman, president and chief operating officer of Owens & Minor. "We are confident in our ability to achieve identified synergies and in the enhanced value we can deliver together for patients, providers and manufacturers. Our two companies share similar cultures, and we look forward to welcoming the Medical Action employees to the Owens & Minor team as we build an industry leader."

"Owens & Minor's position as a leading healthcare logistics company will be complemented by the talented Medical Action employees who provide quality products and solutions that improve patient outcomes," said Paul D. Meringolo, chief executive officer of Medical Action. "Our companies have enjoyed a highly collaborative relationship for over thirty-five years, are built around similar cultures and values and are respected throughout the healthcare community. This transaction represents an excellent outcome for stockholders, employees and customers, who will benefit from the reputation, expertise and knowledge provided by the combined companies."

The transaction, which has been approved by the boards of directors of both companies after an auction process, is subject to customary closing conditions, including Medical Action shareholder approval and regulatory clearances, and is expected to close in the fourth quarter of 2014. The total transaction, including the assumption of Medical Action's remaining outstanding debt net of cash (including the net proceeds of the June 2, 2014 sale of Medical Action's patient care business), is valued at approximately $208 million. Owens & Minor intends to finance the transaction with existing cash balances and available borrowings under its revolving credit facility.

The transaction is expected to be accretive to Owens & Minor's non-GAAP net income in 2015, including anticipated partial synergies in the first full year of ownership. Owens & Minor estimates annual pre-tax cost synergies of $10 to $12 million by the end of calendar year 2016, which excludes potential revenue synergies. Aside from transaction-related costs, which will be reported as acquisition-related and exit and realignment charges, the impact to Owens & Minor 's 2014 non-GAAP net income per diluted share is not expected to be significant, as it will be limited primarily to the fourth quarter of 2014. Owens & Minor intends to provide additional information about the transaction when it reports second quarter 2014 financial results and additional information about the impact to 2015 financial results during its 2014 Investor Day later this year.