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BAUSCH & LOMB ACQUISITION OF DAHLBERG'S 1,000-PLUS AUDIOLOGY FRANCHISES

This article was originally published in The Gray Sheet

Executive Summary

BAUSCH & LOMB ACQUISITION OF DAHLBERG'S 1,000-PLUS AUDIOLOGY FRANCHISES will allow B&L an opportunity to commercialize a 1989 investment in hearing aid technology. B&L's proposed $24 per share cash offer for Miracle Ear hearing aid manufacturer and distributor Dahlberg is valued at $158 mil., Bausch & Lomb said in a Feb. 2 press release. The acquisition will provide B&L an established outlet to market its SoundChoice hearing aid through Dahlberg's Miracle Ear franchise network of more than 1,000 audiology centers. The SoundChoice technology was acquired by B&L in 1989 from Voroba Hearing Systems and has been under development since that time. The device, cleared via the 510(k) process, has been tested in limited markets for over 18 months. Dahlberg's Miracle Ear hearing aid is intended for use by patients with substantial hearing deficits and retails for over $1,000. In test marketing, B&L has been selling the SoundChoice to audiologists for approximately $300, about the same distributor cost as Miracle Ear. The device is primarily targeted to people in the beginning stages of hearing loss. The company also is looking to expand the market to include people interested in using the hearing aid on an "occasional-wear basis." SoundChoice, a soft-shell hearing aid that is placed in the ear canal, is designed to "greatly simplify traditional fitting procedures and provides a major improvement in wearer comfort." Because the device can be fitted in one hour in a single visit, "dispensing differs dramatically from traditional procedures which often require a week or more to complete," according to Bausch & Lomb's 1990 Annual Report. At almost $160 mil., B&L is paying over 30 times Dahlberg's annualized net earnings to acquire the Dahlberg distribution system and the Miracle Ear brand. For the three months ended Oct. 3, 1992, Dahlberg earned $1.1 mil. on sales of $21 mil. B&L praised the Dahlberg business in the Feb. 2 press release, saying that the Miracle Ear brand "is the most widely recognized in the hearing care field in the United States." The company maintains that the Miracle Ear product line currently is marketed through the largest distribution organization in the hearing care field. After the acquisition, Bausch & Lomb will operate Dahlberg as a wholly owned subsidiary and will retain all current Dahlberg management and employees. Dan Gill, chairman and chief executive officer of Bausch & Lomb, notes that "Dahlberg is an outstanding company...we look forward to working with their management, employees and franchised hearing care professionals to serve a market that will continue to experience very good growth over the long term."
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