Fox Paine & Co. Looks To Double Down in Deal –

Fox Paine & Co., LLC this month agreed to buy publicly traded Maxxim Medical, a manufacturer of medical equipment, in a deal valued at approximately $830 million, including assumed debt.

Upon completion of the deal, the firm will split the company into Maxxim, which Fox Paine is pricing at $600 million, and Ciron Corp.-currently a subsidiary of Maxxim-which will be valued at $230 million.

Whether viewed as the acquisition of the companies or a single entity, the deal represents a big investment in the medical equipment business. Fox Paine is committing $100 million in equity to Maxxim and an additional $75 million in equity to Ciron. Together, the total equals 35% of Fox Paine’s $500 million debut buyout fund, and the firm will look to raise an additional $60 million in equity from institutional investors in the form of preferred stock.

BT Alex. Brown, Chase Manhattan Corp., Credit Suisse First Boston, CIBC Capital Corp. and Merrill Lynch & Co. are providing senior and subordinated debt for the investments.

Prior to the June 14th agreement in which Fox Paine offered $26 for shares of the New York Stock Exchange company, Maxxim was trading at $19.88. Although the agreed upon price represents a 30.8% premium, Maxxim’s shares were trading as high as $30 per share earlier this year. At press time, Maxxim was trading at $23.38 per share.

Maxxim-which manufactures and distributes disposable medical products, such as surgical trays, to hospitals-three months ago acquired Ciron for $205 million. Ciron makes equipment for minimally invasive surgery, mainly for gynecologists.

Fox Paine, like a growing number of financial buyers, sees good opportunity in the medical equipment business. “The base businesses are safe and offer consistent cash flow and the value of the companies has dropped like all health care companies and these stocks have been hit indiscriminately,” said Saul Fox, a co-founder at the firm.

The Carlyle Group this month made a similar investment when it agreed to pay $26.50 per share in a $161 million buyout of Empi Inc., a maker of devices that electronically manage pain.

The decision to immediately spin off Ciron, while unusual, is one partners at Fox Paine have tried before. While a partner at Kohlberg Kravis Roberts & Co., Mr. Fox was involved in the 1984 buyout of City Investing, from which Motel Six was immediately spun off.

Maxxim had been dragging more than $400 million in debt because of its acquisition appetite; when the deal closes, Fox Paine will refinance the company’s obligations and shift the debt between the two resulting companies.