Invacare doubles down on HME

ELYRIA, Ohio - Invacare has decided to sell Invacare Supply Group (ISG) because it was “incompatible” with its core business of manufacturing home medical equipment, says Gerry Blouch, president and CEO.

While ISG has been posting solid numbers, Invacare felt that to fully optimize the business it would have had to sell supplies direct to patients, in addition to selling them to HME providers, he said.

“While that type of arrangement can co-exist for someone just doing supplies, it provoked a lot of anxiety for an HME manufacturer,” Blouch said. “It's a great strategy, but we couldn't do it.”

Invacare announced Dec. 21 that it plans to sell Milford, Mass.-based ISG, which generated about $300 million in sales in 2011, to Twinsburg, Ohio-based AssuraMed for $150 million. AssuraMed sells supplies direct to patients through Edgepark Medical Supplies and to HME providers through Independence Medical.

Selling ISG will allow Invacare to focus on growing its core business through R&D and “selective acquisitions,” Blouch said.

“It will give us the gunpowder we need,” he said.

Buying ISG will allow AssuraMed, which serves about 1 million patients through Edgepark and Independence, to combine three businesses experiencing double-digit growth, says Michael Petras, CEO.

“We see tremendous synergies in the customer relationships,” he said. “They're strong in incontinence; we're strong in diabetes—those types of combinations will be very good.”

AssuraMed plans to fold ISG into Independence but maintain a facility in Massachusetts, Petras says.

“We're going through the integration plans now—how to combine the strengths and talents,” he said. “We have distribution centers throughout the U.S. and so does ISG, so we'll have to figure out some of those redundancies.”

AssuraMed, which is owned by private equity firms Clayton, Dubilier & Rice and Goldman Sachs' GS Capital Partners, is “bullish” on the supplies market, Petras says.

“We see a market that is growing 6% plus and that has good demographics—an aging population and an abundance of chronic illnesses,” he said. “There are pricing pressures in the marketplace, but with our scale we're in a good place.”