ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Wednesday, February 12, 1997 TAG: 9702120054
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
THE ROANOKE COMPANY decided to become part of Johnson & Johnson now, rather than later, because of the help its new partner can offer.
Innotech Inc. of Roanoke and Johnson & Johnson, the global health-care giant, said Tuesday they have agreed to a $135 million merger.
The merger could be completed as early as mid-March, when Innotech would become part of Johnson & Johnson's consumer products group. Innotech, which manufactures and distributes eyeglass lens-making machines and supplies, will continue to operate its Roanoke and Petersburg factories independently, as a division of its new parent.
Innotech decided on a merger now rather than later, when its earnings statement might look better, because of the help its merger partner has to offer, including the use of the Johnson & Johnson name.
"We felt, number one, that Johnson & Johnson gave us the ability to expand and penetrate the global market more quickly," said Ron Blum, Innotech's founder, chairman and chief executive officer. "This without a doubt allows Innotech some financial security," he said.
The Johnson & Johnson brand will give Innotech "instant credibility," added Innotech President Steve Bennington. "It will open doors for us."
Amitava Gupta, Innotech's executive vice president of engineering and research and development, said Johnson & Johnson, with its $2 billion annual research-and-development budget, should be able to help the company bring on new products.
Innotech, whose Roanoke factory and headquarters are on Airport Road, employs 200 people, including 52 at a Petersburg plant that makes blank lenses, and 44 salespeople at locations worldwide. The company is working with Roanoke's economic development department on plans to double the size of the Roanoke plant.
Bernard Walsh, chairman of Johnson & Johnson's worldwide vision group, said at a Roanoke news conference that his company has no plans to move Innotech from Roanoke and intends to make significant investments to help it grow.
"We think the growth prospects [for Innotech] are almost limitless," said Walsh, who helped Johnson & Johnson become the world leader in sales of disposable contact lenses. "Ten years from now, Innotech will be the worldwide leader in spectacle lenses," he said, citing Innotech's unique technology.
Johnson & Johnson, based in New Brunswick, N.J., had sales of $21.6 billion last year. The company, which employs 89,300 people, claims to be the world's largest and most comprehensive supplier of health-care products to consumers, pharmacies, and health care professionals.
His company, Walsh said, holds the No.1 share worldwide for more than half of the products it sells.
Johnson & Johnson didn't become interested in Innotech overnight. His company has worked closely with the Roanoke company for at least two years, Walsh said.
Before Innotech became a public company last spring, Johnson & Johnson held an option to buy all of Innotech for $85 million. The option was traded for Innotech shares when it wasn't used before the public offering. Currently, Johnson & Johnson owns about 5 percent of Innotech common stock.
Blum is former chief executive of the Roanoke-based Drs. Blum, Newman and Blackstock, Optometrists, optical shop chain. He started Innotech in 1987 with an idea for a desktop fabrication system for multifocal lenses. His idea was that eyeglass professionals could use the machines to manufacture lenses in their offices, thus eliminating the expense and time of obtaining them from laboratories. The company, which holds 19 patents and has more pending, was incorporated in 1990 and first sold its equipment and supplies in 1993.
So far, Blum said, Innotech has sold 1,000 of its Excalibur fabrication systems worldwide and the supplies needed to make 1 million pairs of multifocal eyeglasses.
For the nine months ended Sept. 30, Innotech reported sales of $7.4 million, a 64 percent increase over the same period in the previous year. Innotech, still burdened with start-up expenses, however, reported a net loss of $8.1 million, equal to $1.15 per share of common stock during the period. Those are the most recent financial figures the company has reported.
Innotech, which has yet to show a profit, became a public company last March. Local shareholders of Innotech appear to number in the hundreds, according to a spot check of local securities brokers.
Johnson & Johnson's cash offer for Innotech equals $13.75 per share. Innotech's stock closed on the Nasdaq national market Monday at $8.875 a share, meaning holders of the shares will bank a nice profit after completion of the acquisition.
How much profit depends on when someone bought the stock. It was first offered to the public last spring at $10 per share and had traded as high as $12.121/2 before yesterday's announcement. After the merger was announced Tuesday, trading in Innotech's shares became brisk with more than 2.3 million shares changing hands, and the stock reached a high of $13.75 a share.
Under terms of the agreement, Johnson & Johnson will begin its cash offer for Innotech stock within five days. Any shares not purchased during the offering period, which will last at least 20 days, will be acquired for the same price after the merger of the two companies.
Blum and other large shareholders, whose holdings represent about a third of Innotech's stock, have already committed to sell to Johnson & Johnson. Blum said he did not anticipate any problems with federal anti-trust law because Johnson & Johnson is not now in the spectacle lens business.
Innotech's employees were told about the merger at a meeting at the Hotel Roanoke & Conference Center on Tuesday, and Bennington said they viewed it as positive.
Johnson & Johnson's Walsh said at a news conference at the hotel after the employee meeting that his company is committed to employees, because it recognizes them as a company's most valuable asset. The company supports local charities and encourages its employees to become involved in the community, he said.
LENGTH: Long : 108 lines ILLUSTRATION: PHOTO: CINDY PINKSTON STAFF. Stephan Oliver, Innotech'sby CNBmanufacturing director, stands by eyeglass lens casting machines.
color. KEYWORDS: JOBCHEK