If Onex Healthcare investors realize an internal rate of return in excess of 25 percent on their investment, Kodak will receive a payment equal to 25 percent of the excess return, up to US-$ 200 million.
Because of tax-loss carry forwards, Kodak expects to retain the vast majority of the initial US-$ 2.35 billion cash proceeds. The company plans to use the proceeds to fully repay its approximately US-$ 1.15 billion of secured term debt. Other potential uses of the cash proceeds are under review.
All 8,100 employees associated with Kodak’s Health Group will continue with the business. Included in the sale are manufacturing operations focused on the production of health imaging products as well as an office building in Rochester, New York.
With sales of US-$ 2.54 billion for the latest 12 reported months (through September 30, 2006), Kodak’s Health Group is an important global player in information technology, molecular imaging systems, medical and dental imaging, including digital x-ray capture, medical printers and x-ray film.
Onex Corporation, based in Toronto, Canada, is a diversified company and one of Canada’s largest corporations, with annual sales of approximately C$ 20 billion and consolidated assets of approximately C$ 20 billion. The company has global operations in health care, service, manufacturing and technology industries. The health care operations include emergency care facilities and diagnostic imaging clinics.
Separately, Eastman Kodak has announced to close a logistics center and materials management operation in Rochester, New York, along with a manufacturing operation that produces specialized solvent-coated products for various lines of business.
480 employees are affected and will be eligible to receive termination benefits that include up to a year’s pay, continuation of health, dental and life insurance benefits for four months, a retraining allowance and outplacement counseling. To cover these costs, asset write-offs and other restructuring related expenses, Kodak will take a US-$ 65 million restructuring charge in the first quarter of 2007. Kodak noted that the closure of the logistics center is part of the company’s digital transformation and will help align the supply chain and logistics function to the digitally oriented operating model of the company’s business units. The closure of the solvent-coating manufacturing operation at Kodak Park is mainly due to the declining demand for products manufactured at the facility, combined with avialable production capacity at other Kodak facilities.