Graham-Field's proposed acquisition of Everest & Jennings would give the company entry to the rehabilitation market, "a virtually untapped marketplace for Graham-Field in the past," the company says.

Hauppauge, New York-based Graham-Field, which distributes more than 22,000 products to home healthcare, physician, hospital supply and pharmaceutical distributors, retailers and wholesalers, announced June 17 an agreement in principle to merge with wheelchair and homecare bed manufacturer Everest & Jennings. The cash and stock deal, which also includes the assumption of Everest & Jennings' debt by Everest & Jennings' majority shareholder BIL (Far East Holdings) Limited, is expected to close in November.

Everest & Jennings' rehab wheelchairs are sold primarily through dealers to physical and occupational therapists. The company has concentrated much of its recent new product development effort on the rehab wheelchair segment.

In 1995, Everest & Jennings introduced several new power rehab models, including: the Quest "entry level Medicare model," the MX and MX Recliner models, the Sabre, and the Vortex Power. The firm also introduced the Metro and Lightning manual rehab wheelchairs, which it says fill "product line voids that specifically target dealers servicing the Medicare market."

The Everest & Jennings name "will permit Graham-Field to introduce its Temco home healthcare product line, as well as its other self-manufactured product lines, into the rehabilitation marketplace," Graham-Field says.

Acquired in 1991, Temco's patient aid product line provided Graham-Field its first line of self- manufactured products for the homecare market. The company's other self-manufactured products include: John Bunn respiratory equipment, Labtron diagnostic products, Aquatherm pressure relief products, Graham-Field brand rubber elastic bandages, and Grafco medical sundries.

In the homecare wheelchair segment, generally comprised of lower-end, lower priced products, Graham-Field already is one of several distributors for Everest & Jennings chairs, including the Vista, Traveler, and Companion models. Everest & Jennings also markets its homecare chairs through "approximately 4,000 homecare dealers," the firm says.

The merger would create a business with about $200 mil. in annual sales, "of which approximately 50% will represent self-manufactured products," Graham- Field says. Graham-Field will "strengthen its manufacturing operations on a company-wide basis" by linking with Everest & Jennings' "world-class manufacturing operation," the firm says.

St. Louis-based Everest & Jennings, which employs about 730 people, recorded a net loss of $5.4 mil. on sales of $74.6 mil. in 1995. The firm generates nearly all its revenue from the sale of wheelchairs, with roughly 45% of revenues coming from wheelchair sales to the rehab market, 30% from wheelchair sales to the homecare market, and about 10% from wheelchair parts. Through its Smith & Davis subsidiary, the company also sells homecare beds.

Everest & Jennings has wheelchair manufacturing subsidiaries in St. Louis; Toronto, Canada; and Guadalajara, Mexico. A separate Smith & Davis facility in St. Louis manufactures homecare beds.

Graham-Field, a 500-employee operation, posted $100.4 mil. in sales during 1995 and recorded net income of $738,000, its first year in the black since 1992. For the first quarter of 1996 (ended March 31), the company earned $510,000 on $26.9 mil. in sales. Approximately 30% of the firm's sales are generated by its own manufactured products; the remainder is generated through its distribution business.

Through distribution centers in Hauppauge, St. Louis, and Placentia, California, Graham-Field markets its self-manufactured products and several lines of "proprietary" products, including the Diamond incontinence product line, Feather surgical blades and scalpels, and Suzuken-Kenz EKG machines.

In addition to deals with Everest & Jennings and Smith & Davis, Graham-Field also supplies "on a wholesale basis" products manufactured by Baxter General Healthcare Products, Convatec Ostomy Products, Boehringer Mannheim Home Diagnostic Products, Ross Nutritional Products, Concord Portex Anesthesia, Mentor Urologicals, and Proctor & Gamble Adult Incontinence Products. The company is in the process of opening a new distribution center in Jacksonville, Florida.

Combining Everest & Jennings' manufacturing operations with Graham-Field's distribution network will "provide penetration in both the homecare and rehabilitation markets with a greater level of service and efficiency, as well as a broader portfolio of products," Graham-Field says.

Achieving a greater level of efficiency holds particular significance for Everest & Jennings, which has been on shaky financial ground for several years. The firm took a $50.9 mil. net loss in 1990, the same year it failed to pay principal and interest on notes due to a creditor in July 1990. Charges from a debt reduction program launched in 1991 led to a $17.1 mil. loss that year ("The Gray Sheet" Sept. 16, 1991, p. 21). The company, which announced another debt reduction program in 1993, has booked net losses every year since 1989.

Graham-Field says the terms of the merger allow it to acquire a debt-free company. BIL, owner of an 85.5% stake in Everest & Jennings, will assume responsibility for the firm's debt in exchange for stock in Graham-Field.

Under terms of the deal, Graham-Field will issue up to 1.8 mil. shares of its stock and $14.4 mil. to holders of Everest & Jennings common stock. Everest & Jennings shareholders will receive one Graham-Field share for every four shares of Everest & Jennings stock, plus $2 cash for every Everest & Jennings share. Graham-Field stock closed June 14 at $9 per share; Everest & Jennings stock closed at $4-7/8.

BIL will receive up to 1.9 mil. additional shares of Graham-Field stock in exchange for repayment of Everest & Jennings' roughly $25 mil. in debt owed to the Hong Kong and Shanghai Banking Corporation Limited. The 1.9 mil. shares will be valued at the greater of $13 each or the average market price of Graham-Field stock for the ten days prior to the deal's closing

In addition, all debt of Everest & Jennings to BIL and all convertible preferred stock of Everest & Jennings held by BIL will be exchanged for approximately $60 mil. in convertible preferred stock of Graham-Field. The convertible preferred stock will yield a 2% dividend annually, to be paid either in cash or stock, at Graham- Field's discretion.

For five years following completion of the deal, the preferred stock will be convertible into common Graham-Field stock at conversion rate of $20 per share. If the convertible preferred stock is not converted during the five year period, it will automatically convert on the closing date's five-year anniversary at a rate of $15.50 per share. Upon completion of the merger, BIL will hold an approximately 30% stake of Graham-Field.

Graham-Field says it will evaluate Everest & Jennings' existing distribution network, but likely will look to consolidate the operation into its own. No changes to manufacturing facilities are planned after the merger, Graham-Field says.

Bevil Hogg, Everest & Jennings' president and CEO, will become a corporate officer of Graham- Field and will continue as president of its Everest & Jennings. Everest & Jennings Chairman and BIL Director Rodney Price will become a member of Graham-Field's board.

GRAHAM-FIELD ROLLS INTO REHAB MARKET WITH $115 MIL. EVEREST & JENNINGS BUY; COMBINED FIRM WILL LOOK TO REHABILITATE E&J'S SAGGING FINANCIAL CONDITION

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