Business, critical & general care  

Philips moves into home healthcare

23 January 2006

Amsterdam, The Netherlands & Framingham, Mass., USA. Royal Philips Electronics (NYSE:PHG, AEX:PHI) is to take over the US company Lifeline Systems, Inc. (NASDAQ: LIFE), the leading provider of personal response services and emergency call systems in the United States and Canada.

Lifeline supports nearly half a million subscribers to its services and 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 October last year, it was also selected for the fourth consecutive year by Forbes magazine as one of Forbes' 200 Best Small Companies.

Philips has agreed to acquire Lifeline for US$47.75 per share or a total equity value of US$750 million (equalling an aggregate value of US$690 million net of US$60 million cash and cash equivalents) in a transaction that has been unanimously approved by the Board of Directors of Lifeline. Completion of the transaction is subject to the terms and conditions of the merger agreement, which contains customary closing conditions and is subject to the approval of Lifeline's shareholders.

The acquisition is one of the first moves for Philips' new Consumer Health and Wellness business, which is part of the Domestic Appliances and Personal Care division.

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

The aging of the population provides strong underlying market growth for home healthcare solutions such as those offered by Lifeline. Today, seniors represent around 15% of the population in the developed world and are expected to almost double in size over the next 25 years. At the same time they are becoming increasingly active in managing their own health and wellness. Personal response services are already the largest category of home healthcare solutions purchased out-of-pocket by older adults and their caregivers. Still, penetration in the age group 65 years and older is just 2-3%, allowing for significant future growth.

Lifeline's revenues in 2005 are expected to be approximately US$150 million, representing a 15% increase over 2004. A large part of the revenues are recurring in nature. Lifeline's operating margins in 2005 are expected to be approximately 15%. The company has a broad market presence in the United States and Canada. The company markets its services through a network of more than 2,500 hospitals and other healthcare providers and serves a subscriber base of nearly 470,000.

Lifeline's twenty-four hours a day service gives independently minded seniors the confidence to maintain an active life at home, knowing if they suddenly need help, they can send an alert to a monitoring centre that indicates that they need assistance. Two-way communication allows a caring and professionally trained operator — who has instant access to the pertinent health history and personal profile of the caller — to establish the nature of the problem. Appropriate action can then be taken, including notifying a neighbour or family member, or summoning emergency services.

"Our many years of understanding consumers and their needs have led us to identify 'healthcare at home' as a key sector for us," stated Ivo Lurvink, CEO of Philips Consumer Health & Wellness. "Lifeline is a market-leader that offers us a platform for other home healthcare products and services. As such it complements our existing presence in telemedicine, showcased in Motiva, our advanced interactive healthcare system. We believe our brand, global presence, technology and innovation capabilities will accelerate the growth of the company and we're very much looking forward to working with their experienced management team and talented employees."

Lifeline President and CEO, Ron Feinstein said: "Philips' acquisition of Lifeline represents the next phase in the continued evolution and growth of our company. This combination of two industry leaders opens up numerous product and technology synergies, as well as growth opportunities designed to both further and broaden Lifeline's founding mission of providing personal emergency response and support services to the at-risk elderly and their families to enhance their independence and quality of life."




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