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Onex explores breaking up Carestream Health in sale: Reuters

(Reuters) — Buyout firm Onex Corp (OCX.TO) has revived an auction for Carestream Health that could value it at more than $3 billion, including debt, and is exploring a breakup of the U.S. medical imaging company, people familiar with the matter said.

Onex sought to sell Carestream in 2013 but decided to hold on to it after the offers it received from private equity firms did not meet its valuation expectations. The latest move underscores the diverging fortunes of Carestream’s businesses.

Carestream’s traditional x-ray film business has been challenged as its clients transition to digital imaging solutions. Its smaller dental digital equipment division, however, saw sales rise last year amid strong demand.

Carestream is now working with Goldman Sachs Group Inc (GS.N) to find a buyer for its film and digital medical imaging business, while Jefferies LLC has been assigned to seek a sale of the dental imaging business, the people said this week.

The sources asked not to be identified because the sale process is confidential. Carestream and Onex did not respond to requests for comment, while Goldman Sachs and Jefferies declined to comment.

Rochester, New York-based Carestream sells traditional imaging products, such as x-ray film and printers, as well digital offerings, such as computed radiography and digital radiography equipment, picture archiving and communication systems.

Carestream reported revenues of $2.1 billion in 2015, down 9 percent from 2014. It reported earnings before interest, taxes, depreciation and amortization in 2015 of $360 million.

Carestream was formed in 2007, when Onex purchased the healthcare division of imaging company Eastman Kodak for $2.35 billion.

Onex worked with Goldman Sachs, Bank of America Corp BAC.N. and Credit Suisse Group AG (CSGN.S) to find a buyer for Carestream in 2013, Reuters reported at the time.

However, the challenges of making the transition from x-ray films to digital technology, particularly in international markets, led other potential private equity buyers to take a dim view of Carestream’s valuation at the time, the people said.

Following that sale process, Carestream issued a statement in which it said that, as a result of its exploration of strategic alternatives, it had decided to refinance the company’s debt and “continue to invest in long-term growth.”

Onex has had Carestream pay it several dividends by taking on additional debt. By 2013, when it first explored Carestream’s sale, Onex had already made 2.6 times itsinvestment in the company, according to the statement at the time.

(This story corrects paragraph one spelling to “breakup” instead of “break up”)
(Reporting by Carl O’Donnell and Greg Roumeliotis in New York)