Diagnostics & Imaging Week

Continuing to expand its already large presence in the healthcare/monitoring space – and seeing opportunity in aging populations worldwide – Royal Philips Electronics (Amsterdam, the Netherlands) unveiled plans last week to acquire Lifeline Systems (Framingham, Massachusetts), a large North American provider of personal emergency response services.

The deal is valued at $750 million. Philips will pay $47.75 a share for Lifeline, or a total equity of $690 million net of $60 million cash and cash equivalents, in a deal approved by its board.

"The acquisition of Lifeline is an important step on our roadmap for growth in healthcare," said Gerard Kleisterlee, president and CEO of Philips. "By targeting seniors and other people who want to continue living independently and exerting more control over their health and lifestyle, we aim to become a global player in the evolving home healthcare market."

Ron Feinstein, president and CEO of Lifeline, in a Thursday afternoon conference call, said that the link-up with Philips would give opportunities to expand "far faster than we could on our own" as a stand-alone company and thus be in a "far stronger position to develop technology and services for future generations of seniors."

The company estimated seniors as about 15% of the population in the developed world – with expectations to nearly double over 25 years – and wanting to stay increasingly active in managing their health.

"Personal response services are already the largest category of home healthcare solutions purchased out-of-pocket by older adults and their caregivers," Philips said in a statement, while noting just single-digit penetration of these services by those 65 and older.

While Lifeline's presence is primarily in North America, Feinstein more than once referred to "worldwide" opportunities, and the linkup with Philips suggests expansion to international markets.

Lifeline's revenues in 2005 are expected to be about $150 million, a 15% increase over 2004. Its '05 operating margins are expected to be about 15%, with strong U.S. and Canadian market presence through a network of more than 2,500 hospitals and other healthcare providers. It reports a subscriber base of nearly 470,000.

Lifeline provides 24/7 monitoring and two-way communication with its response locations and enabling instant access to a person's health history and the provision of appropriate action or emergency services notice or family notification, if needed.

"Our many years of understanding consumers and their needs have led us to identify 'healthcare at home' as a key sector for us," said Ivo Lurvink, CEO of Philips Consumer Health & Wellness. Lifeline, he said, "complements our existing presence in telemedicine, showcased in Motiva, our advanced interactive healthcare system."

Feinstein noted important synergies, through the combination "of two industry leaders," for benefiting the "at-risk" elderly and their families.

As of Sept. 30, Lifeline said it had nearly 470,000 subscribers from its response centers in Massachusetts, Ontario and Quebec.

Lifeline also supplies emergency response equipment and services to owners and developers of independent and assisted living and continuing care retirement communities across North America.

In its conference call, Lifeline officials said the company would supply additional specifics on the deal when it submits proxy materials.

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