If all you knew about InfoLogix Inc. was that it was involved in wireless technology with health-care customers, you might think that would be a recipe for endless growth.
That has not been the path of the Hatboro company, however. Over the last three years, InfoLogix has lost $42.2 million, restructured, refinanced its mounting debt, and finally saw its shares delisted in October.
So why did Stanley Black & Decker Inc. last week strike a deal to buy InfoLogix in a transaction valued at $61.2 million?
Because the New Britain, Conn., tool giant is hoping InfoLogix can help it build its sales to health-care customers to $1 billion in about three years, according to InfoLogix president and chief executive officer David T. Gulian.
The Hatboro operations where nearly 100 people work not only stays, but will probably grow in coming years, said Gulian, who founded InfoLogix in 2001.
Stanley Black & Decker will pay $4.75 a share in cash for InfoLogix. That is nearly $3 more than the $1.80 InfoLogix shares closed at on Wednesday in the trading session before the deal was announced. InfoLogix shares closed Friday at $4.63, down a penny.
That is still just a fraction of where InfoLogix shares once traded after the company underwent a 1-for-25 reverse stock split last January. Those who've been shareholders since InfoLogix went public in November 2006 probably aren't thrilled by the offer.
In this case, only one shareholder really matters - Hercules Technology Growth Capital Inc., a specialty-finance company that controls 73 percent of InfoLogix's shares. And Palo Alto, Calif.-based Hercules has signed off on tendering its shares and selling the InfoLogix debt it owns to Stanley Black & Decker.
InfoLogix may be just one of 140 companies in Hercules' portfolio, but its difficulties were important enough to be brought up by two analysts in a Hercules conference call in early November.
Hercules CEO Manuel A. Henriquez noted that his firm had written down the value of the InfoLogix securities it owned after the stock had been delisted. But he reminded the analysts that InfoLogix's annual revenue was once more than $100 million and said InfoLogix was "well-positioned for health-care reform" with a "very good foundation" of hospital and health practitioner clients.
That jibes with what Gulian, 46, told me. Electronic medical records and other mobile technologies may be the future, but hospitals and other health-care providers got squeezed in the short-term by the recession as well as by uncertainty over what mandates for health-care information technology would be included in the 2009 economic-stimulus plan, Gulian said.
InfoLogix acquired three companies in 2007 and 2008 to help it evolve from an equipment reseller into a provider of software and services. At the same time, business spending slowed down, forcing the company to cut back, Gulian said.
A filing with the Securities and Exchange Commission details a series of attempts to recapitalize InfoLogix, sell assets, or find an outright buyer since January 2009.
Announced last week, the deal with Stanley Black & Decker carries a $2 million breakup fee, and the transaction is expected to close in the first quarter of 2011.
Hammers, drills and other power tools would seem to have little synergy with mobile workstations and equipment-tracking systems for hospital settings. However, Stanley Black & Decker, with about $6 billion in net sales for the first nine months of 2010, has been trying to diversify so it is not so dependent on pushing products through Home Depot and other mass merchants.
Gulian and InfoLogix chief operating officer Eric N. Rubino will remain in charge of the InfoLogix business once the acquisition is completed. And Gulian said he was looking forward to focusing on expanding the business after two years of scrambling for capital.