The merger of Draper-based Ballard Medical Products and tissue product monolith Kimberly-Clark Corp. has been delayed as federal regulators take a closer look at Kimberly-Clark's accounting ledgers.
The Securities and Exchange Commission will review $1.6 billion in restructuring charges Kimberly-Clark took in 1995 and 1997. The bulk of those charges are related to the $9.4 billion purchase of Scott Paper Co. in 1995, said Tina Barry, company vice president of corporate communications.Though the federal review is unrelated to the merger with Ballard Medical, it will delay Kimberly-Clark's purchase of the company for an indeterminate time, Barry said.
The merger was announced last December and featured a stock swap valued at $764 million. Kimberly-Clark agreed to pay $25 a share for each of Ballard's 30.5 million shares. The transaction would be tax-free to shareholders.
Officials at Kimberly-Clark said the acquisition would strengthen its line of disposable health-care products. Ballard makes specialized disposable products; it sells more than 80 percent of all closed suction catheters used in U.S. hospitals.
Both companies at that time expressed hope the merger would be finalized in the spring. Now, they are forced to bide their time until the SEC completes its review.
"This is an ongoing process," Ballard executive vice president Harold "Butch" Wolcott said. "It's something we've been in the middle of for quite some time. This delay is more or less a status quo situation we've been in for the last several weeks."
Ballard has the option to terminate the transaction if it is not completed by the end of September. But, Wolcott told media, "we don't believe it will drag on that long."
"It's hard to predict" how long the SEC review will last, Barry said. "But we hope the merger will be completed this summer. And, while the merger has been delayed, we continue to be excited about the transaction and its ability to contribute to sales and earnings for our company."
Barry said officials of Kimberly-Clark, headquartered in Dallas, are neither worried nor surprised the SEC chose to review the company's restructuring charges.
"The review is consistent with the SEC's focus on companies that have taken restructuring charges," Barry said. "They sent letters to 150 companies in early 1999 providing guidelines on restructuring actions and notifying those companies that their financial statements could come under review.
"It is not surprising that Kimberly-Clark would come under review, given our purchase of Scott Paper Company. But we are not alone in having the SEC look at our restructuring charges."