Bountiful-based Specialized Health Products International Inc. will merge with The Med-Design Corp., a California company also involved in producing technology for safety medical needles.
The combined company, which would be named Salus Medical Inc., would be headquartered in Bountiful. "Salus" is Latin for "health, safety, well-being."
Med-Design, incorporated in 1994 and based in Ventura, Calif., would become a Salus wholly owned subsidiary.
Med-Design stockholders will receive equity of Specialized Health Products equal to about one-third of the outstanding shares of the combined company.
"By combining these two independently growing technology companies into one stronger, more efficient entity, we expect to expand our presence in safety medical needles and create new opportunities to drive profitable growth," Jeff Soinski, president and chief executive officer of SHPI, said in a prepared statement.
Soinski said the merged company should be able to reduce combined annual expenses by $4 million to $5 million, or about 70 percent to 85 percent of Med-Design's stand-alone expenses on an annual basis.
"The combination will also provide us with reliable new revenue streams, significant additional cash and an expanded pipeline of new products. We expect the combined company to be profitable and generate positive cash flow in 2006," he said.
Both companies' boards of directors have approved the merger agreement and will recommend stockholders vote for the transaction, which is expected to close by the 2006 first quarter.
Soinski will continue as president and CEO of the combined company. The chairman of the board of directors will be Guy Jordan, SHPI's current board chairman.
The companies reported combined revenue of $9.8 million in the year ended Sept. 30. Med-Design's revenue of $3.2 million during that period included about $1 million from its licensing agreements with Becton, Dickinson and Co.
"This combination creates the opportunity to build significant value for both companies' stockholders," Vincent Papa, chairman of the Med-Design board, said in a prepared statement. "The Med-Design board is pleased that this stock-for-stock transaction allows Med-Design stockholders to participate in the potential upside as these two independently growing companies are combined into a new and highly efficient competitor."
The merged company would continue to be traded under the symbol SHPI on the OTC Bulletin Board until a new Nasdaq listing symbol is approved.