Philips in $5 billion Respironics deal

By Foo Yun Chee and Niclas Mika

AMSTERDAM (Reuters) - Philips (PHG.AS) plans to buy U.S. sleep therapy products maker Respironics Inc RESP.O for $5.1 billion, its largest deal to date in an aggressive expansion in the fast-growing health-care sector.

Philips has been on a shopping spree in recent weeks, agreeing to buy U.S. lighting maker Genlyte Group GLYT.O for $2.7 billion and medical systems and services provider Visicu EICU.O for $430 million.

Together with a 5 billion euro share buyback announced this week, the acquisitions are a leap forward in Philips' efforts to reduce its cash pile and return to a leveraged balance sheet by the end of 2009.

"We have passed the 10 billion euro mark twice -- for closed and announced acquisitions as well as for the total of realized and announced share buybacks," Philips Chief Executive Gerard Kleisterlee told journalists on a conference call.

"In total, we are talking about a reallocation of over 20 billion euros of capital since 2005," he said.

Philips -- the world's biggest lighting maker, a top three hospital equipment maker and Europe's biggest consumer electronics producer -- said it would pay $66 per share for Murrysville, Pennsylvania-based Respironics, a 24 percent premium to its Thursday closing price.

The acquisition will add to earnings from the beginning, Philips said.

The purchase price amounts to about 22.5 times expected 2008 earnings before interest, tax and amortization.

"The multiples are relatively high but in line with the strong growth rate of this company," SNS Securities analyst Victor Bareno said in a note.

The deal could be a signal of more to come in U.S. medical technology sector, according to some industry observers.

"There was a decent amount of M&A in medtech in 2007 until August, when the credit markets collapsed. This deal today says that M&A is still alive and well," said BMO Capital Markets analyst Joanne Wuensch.

The weak dollar is also a contributing factor, she added. "Just as Europeans are out shopping on Fifth Avenue, they're also out shopping for U.S. companies."

Respironics shares were up $12.25 to $65.36 in morning Nasdaq trade. Philips shares fell 2.12 percent to 30.06 euros in Amsterdam.

HOME HEALTH CARE

Respironics is focused on medical equipment used in the home, particularly to diagnose and treat sleep and respiratory disorders such as obstructive sleep apnea. It has recorded a compound annual growth rate of around 19 percent in recent years. Its main rival is ResMed Inc (RMD.N) (RMD.AX), whose shares were up 15 percent in New York.