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Contact:
Cardiac Science Inc. Batchelder & Partners Inc.
Raymond W. Cohen Kathy Scott
President & Chief Executive Officer Partner
(949) 587-0357 (858) 704-3300
Filed by Cardiac Science, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company: Spacelabs Medical, Inc.
Commission File No. 0-20083
CARDIAC SCIENCE OFFERS TO ACQUIRE
SPACELABS MEDICAL FOR $15 PER SHARE
IRVINE, Calif. -- Nov. 27, 2000 -- Cardiac Science Inc. (Nasdaq:
DFIB) today announced that it has offered to acquire all of the outstanding
common stock of Spacelabs Medical Inc. (Nasdaq: SLMD) for $15 per share. The
offer represents a 45 percent premium above Spacelabs' stock price at the time
of Cardiac Science's first proposal made on Nov. 13, and is significantly
above Spacelabs' average share price for the past six-months.
"We believe Cardiac Science's technology has the unique ability to
unlock value for Spacelabs' shareholders thereby creating a compelling
rationale for this business combination. Recurring revenue, competitive
marketing advantages and the potential to save thousands of lives can be
anticipated by combining our proprietary automatic defibrillation technology
with Spacelabs' bedside, portable and ambulatory patient monitoring products,"
said Raymond W. Cohen, president and CEO of Cardiac Science. "First and
foremost, our strategy is to leverage Spacelabs' large installed base of
approximately 65,000 hospital patient monitors and transform it from a cost
center into a profit center that can generate significant recurring revenue.
Secondly, we plan to refocus marketing efforts on cardiac patient monitoring
which has historically been Spacelabs core business strength, where technology
synergies exist between our companies and new market opportunities are
plentiful."
Cardiac Science intends to integrate its unique automatic
defibrillation technology into Spacelabs' installed base of hospital patient
monitors at no capital equipment cost to hospitals. Once connected to a
Spacelabs monitor, Cardiac Science's defibrillation module assures that
patients are defibrillated within seconds and without the intervention of
hospital staff should they suffer a sudden life-threatening heart rhythm.
Hospitals can then offer patients improved care while only incurring the
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cost of prophylactically-attached proprietary disposable electrodes that are
replaced daily. The anticipated effect will be to significantly accelerate the
adoption rate of Cardiac Science's core technology and potentially save
thousands of lives, and reduce hospital costs and liability by preventing
patient complications caused by delayed defibrillation.
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It is anticipated that the integration of Cardiac Science's
life-saving technology into Spacelabs' patient monitors will provide
performance and marketing advantages in a rapidly consolidating and highly
competitive patient monitoring marketplace. Moreover, Cardiac Science believes
this strategy will motivate other manufacturers in the $2 billion annual
patient monitoring marketplace, such as Phillips Electronics, GE Medical,
Siemens, Datex-Ohmeda and Welsh Allyn Protocol to integrate Cardiac Science's
defibrillation technology both in their new products and as an upgrade to
their existing installed systems.
New market opportunities are also foreseen for the combined company.
The integration of Cardiac Science's patented wearable automatic
defibrillator, currently under development, with Spacelabs ambulatory cardiac
telemetry and telemedicine monitoring products would potentially yield the
first and only small wearable cardiac patient defibrillator-monitor capable of
collecting and transmitting diagnostic information and providing protection
and critical life-saving defibrillation therapy for millions of cardiac
patients. Also, it has the potential to penetrate the emerging at-home market
for 4.8 million patients discharged from U.S. hospitals each year who are at
temporary risk for a period of days to weeks of suffering life-threatening
heart rhythms.
Batchelder & Partners, Inc., a San Diego based financial advisory
firm, has been retained by Cardiac Science to assist the company with the
proposed transaction. The most recent offer to acquire Spacelabs was
communicated to the Spacelabs board of directors in a letter from Cardiac
Science's president and chief executive officer. The full text of the letter
sent to Spacelabs Medical follows at the end of this news release.
ABOUT PATIENT MONITORING AND LOW SURVIVAL FROM CARDIAC ARREST IN HOSPITALS
Hospitals use patient monitors primarily as surveillance and
detection tools to alert caregivers about the onset of a life-threatening
event or deterioration of a patient's physiological status. Foremost amongst
caregiver concerns are sudden lethal abnormal heart rhythms (cardiac arrest)
that cause irreversible vital organ damage and patient death if not rapidly
treated. While time to defibrillation is known to be a critical factor in
saving lives, hospital studies have documented significant delays before a
patient is defibrillated. For each minute that passes, a patient's chance of
survival declines 10 percent.
The American Heart Journal (AM Heart J 137(1): 39-48, 1999) recently
published a report of 113 clinical studies that included 26,095 patients. It
revealed that patients in critical care units who
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suffered an in-hospital cardiac arrest had a low survival rate of 15.2 percent
despite continuous monitoring and ready access to trained personnel and
standard manual defibrillators. In October, The New England Journal of
Medicine (N Engl J Med 2000; 343:1206-9) concluded that intervals of no more
than three minutes from the onset of lethal abnormal heart rhythms to first
defibrillation shock are necessary to achieve the highest survival rates.
The American Heart Association, in August, revised CPR and emergency
cardiac care guidelines to include a new global standard for the treatment of
patients who suffer life-threatening heart rhythms in hospitals. The AHA
guidelines place major emphasis on the need for immediate defibrillation, and
for the first time established specific response time goals for resuscitation.
The AHA has tasked hospitals to deliver a defibrillation shock within 180
seconds of cardiac arrest onset and stated that reducing the time to first
shock by as little as 60 seconds does more to improve patient survival than
all the cardiac medications, airway interventions and newly designed biphasic
defibrillators combined.
Unlike traditional systems, Cardiac Science's fully automatic
detection and defibrillation technology continuously monitors a patient's
cardiac activity, instantly detects the onset of a life-threatening heart
rhythm, and when appropriate, automatically delivers defibrillation shocks
within as little as 10 seconds and without human intervention to re-establish
the heart's normal rhythm. Pacing And Clinical Electrophysiology (PACE Vol.
22; 11/1999; p.1648-1655), a peer reviewed cardiology journal, published
results from a multi-center study that concluded Cardiac Science's AECD
technology potentially represents a means to improve both mortality and
morbidity associated with in-hospital cardiac arrest.
ABOUT CARDIAC SCIENCE
Cardiac Science develops and markets life-saving external cardiac
defibrillator devices and proprietary software that monitors and automatically
treats patients who suffer life-threatening heart rhythms. The company's core
proprietary tachyarrhythmia detection, defibrillation and electrode technology
platform has multiple applications, including use in external and wearable
defibrillators and with standard patient monitors widely used in hospitals
throughout the world. The growth of the company's installed base provides a
recurring revenue stream from the sale of proprietary disposable defibrillator
electrodes.
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The company has an exclusive agreement with Medtronic Physio-Control,
a division of Medtronic Inc., (NYSE: MDT), the worldwide market leader in
defibrillator products, to distribute the Company's first commercial product,
the Powerheart(R), which began shipping in early 2000, in the United States,
Canada, and nine European countries. The company also sells its products via
prominent independent distributors encompassing Asia, the Middle East, Europe
and South America. For more information on Cardiac Science, please visit its
Internet site at www.cardiacscience.com.
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Act of 1934. Such forward looking statements include, but are not
limited to: a potential transaction between Cardiac Science Inc. and Spacelabs
Medical, Inc. that may or may not occur; the life-saving potential of Cardiac
Science's technology; the Company's ability to integrate its technology into
Spacelabs monitors, develop new products; and improve patient-care. Cardiac
Science cautions that these statements are subject to substantial risks and
uncertainties and are qualified by important factors that could cause actual
results to differ materially from those reflected by the forward-looking
statements and should not be relied upon by investors when making an
investment decision. Information on these and other factors is detailed in the
Company's Form 10-K for the year ending December 31, 1999 and other documents
filed with the Securities and Exchange Commission.
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[Cardiac Science Letterhead]
November 27, 2000
Mr. Carl A. Lombardi
President and Chief Executive Officer
Spacelabs Medical, Inc.
15220 N.E. 40th Street
Redmond, WA 98073
Dear Mr. Lombardi:
On behalf of Cardiac Science, Inc. and its board of directors, I
would like to re-emphasize our strong interest in pursuing the combination of
Cardiac Science and Spacelabs Medical. We believe the combined companies will
yield a formidable force in the patient monitoring industry, creating
substantial operating and financial synergies, and yielding a significantly
stronger enterprise for all of our shareholders.
Your rejection of our previous letter puzzles us, as we believe this
transaction is in the best interest of all of your constituencies. We respect
the proud tradition of Spacelabs Medical and the status it enjoys in the
marketplace. Thus we are disappointed you have chosen not to give our proposal
serious consideration. We would, therefore, again like to request a meeting
with your board of directors so that we may fully discuss our proposal.
We are proposing that Cardiac Science acquire all of the outstanding
shares of common stock of Spacelabs for a price of $15 per share. This price
is a 45% premium above your share price at the time of our first proposal on
November 13, 2000, and significantly above your average stock-trading price
for the last six months. We believe that this proposal will be attractive to
your shareholders. We are prepared to pay stock, cash or a combination thereof
in the transaction, depending on your shareholders' preferences. A stock
transaction would allow your shareholders to continue to participate in the
combined company's success, which we believe would be substantial. Our
proposal is not subject to due diligence; however, with due diligence we may
be able to increase the per share price of our proposal. Our financing sources
are prepared to provide the necessary cash component for a negotiated
transaction. We are prepared to discuss our financing sources with you at the
appropriate time. We believe that this premium proposal provides value to the
Spacelabs' shareholders well above what could be achieved by Spacelabs as a
stand-alone company, now or in the foreseeable future.
Indeed, Spacelabs' financial results over the last several years are
indicative of a company with a deteriorating operating performance. Its
revenue has remained substantially flat since 1992, despite an investment of
over $150 million in research and development over the last five years. We
believe that your problems will become magnified in the future as larger
competitors enter the field and ramifications of regulatory and reimbursement
policy changes in the United States are felt.
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We believe the combination of our two companies will be beneficial to
both shareholder bases, and greatly enhance available opportunities. For
example, the combination of Spacelabs' products and our automatic
defibrillation technologies would yield a significant competitive advantage in
the worldwide patient monitoring marketplace when selling new systems, and,
moreover, generate significant recurring revenue and profit from your existing
installed customer base. As you know, Cardiac Science's patented and
proprietary fully automatic detection and defibrillation technology easily can
be integrated with Spacelabs' bedside and portable patient monitors. A part of
our sales and marketing strategy is to install our technology, without the
hospital having to pay for the capital equipment, into virtually all of
Spacelabs large base of hospital monitors currently in use in worldwide.
Hospitals are enthusiastic about protecting their cardiac patients with this
unique life-saving capability, and appreciate the economics of incurring only
the daily cost of replacing specialty electrodes. We believe this strategy
will transform your installed base into a valuable profit center that
generates ongoing recurring revenue from the sale of the aforementioned
proprietary electrodes. Moreover, we intend to refocus Spacelabs' efforts on
its core cardiac patient monitoring business, an area in which Spacelabs
historically has been successful. We believe significant synergy exists
between the combined entities and market opportunities are plentiful.
Our industry's competitive landscape has experienced dramatic change
as merger and acquisition activity has sharply increased among the larger
companies. The recently announced acquisition of Agilent Technologies'
Healthcare Solutions Group by Philips Electronics demonstrates that
consolidation is occurring quickly. Companies such as Philips and GE Medical
have substantial financial strength and will look for ways to expand market
share.
We are confident that we will be able to integrate the two companies
to build a highly focused efficient company with a greatly enhanced revenue
base. Additionally, employees of both companies will benefit from the greater
resources and opportunities that come from being part of an agile,
aggressively positioned corporation.
Cardiac Science's board of directors unanimously supports the
combination of our companies. A transaction can be completed quickly and we
will make all resources available to meet this goal. We know that your
shareholders will recognize that our proposal offers substantially greater
value than can be achieved by Spacelabs alone. We, along with our advisors,
Batchelder & Partners, Inc. and Bryan Cave LLP, are prepared to meet with you
to negotiate a definitive agreement with respect to our proposal.
We hope that you appreciate our serious commitment to completing the
proposed transaction in a manner that most benefits our respective employees
and shareholders.
Sincerely,
Cardiac Science, Inc
Raymond W. Cohen
President and Chief Executive Officer
