Park Medical files for bankruptcy as acquisition negotiations drag on

Company's president still expects deal to sell off firm

Cash-strapped Park Medical Systems filed for bankruptcy protection in a Montreal court last month. Although the filing appears to be a setback for the Canadian gamma camera developer, company officials say it is a tactical maneuver designed to make it easier to sell the firm off to interested buyers.

Park has been hamstrung since its inception by a working capital shortage, and it has not enjoyed the purchasing levels for its digital gamma camera technology that it initially planned. The slowdown of the nuclear medicine market hurt the company, as did concerns among potential customers about the size and long-term viability of the firm.

Park's worsening financial outlook resulted in the bankruptcy filing, which occurred in early July after months of uncertainty about the company's future prospects. The Lachine, Quebec-based firm has undergone two rounds of layoffs this year, the second of which occurred in June, just prior to the Society of Nuclear Medicine meeting (SCAN 6/25/97). Park said the layoffs were necessary to conserve cash as it pursued negotiations with several firms interested in buying the company.

Park's negotiations have dragged on longer than expected, however, and Park has been unable to meet its commitments, according to parent company Park Meditech. The company's creditors were becoming anxious, and the firm had no other alternatives, Park Meditech said.

The negotiation process to divest Park has been prolonged because several new companies entered the bidding after the SNM meeting, due to interest in Park's Molecular Coded Aperture Technology for SPECT cameras, which was introduced at the conference, according to Richard Mullen, president and CEO.

"Interest blossomed to the point where we found it hard to negotiate with several companies at one time," Mullen said.

The bankruptcy filing improves the likelihood that Park can come to terms with a potential acquirer by giving it protection from creditors, whose claims might interfere with the transaction. Park Meditech estimated the value of Park's technology and manufacturing assets at $15 million (Canadian).

Park Medical Systems is the main subsidiary of Park Meditech, which also operates Park Medical Systems U.K. Ltd., the successor to workstation software developer Bartec. Although the U.K. subsidiary was not included in the bankruptcy filing, it could be included in the disposition of the Canadian company's assets.

Mullen expects to be able to announce the identity of the company that will buy Park Medical by the middle of this month. Until then, the company will continue to service its installed base, and will continue development of new technologies like MCAT SPECT, Mullen said.