Rationalisation in Australia’s $4 billion plus a year diagnostic imaging sector with the news that Capitol Health is bidding to mop up the slightly larger rival, Integral Diagnostics in a $356 million bid.
The two companies are small scale players compared to the industry giants in primary Healthcare ($1.9 billion) and Sonic ($9.4 billion)
The shares and cash deal values Integral ($343 million) at $2.46 a share, based on Capitol’s ($252 million) most recent close of 30.5 cents .Capitol is offering 6.9 Capitol shares and 36 cents cash for each Integral share.
Capitol says Fund managers Adam Smith Asset Management, Microequities Asset Management, Regal Funds Management and Wilson Asset Management, who together own 19.55% of Integral, have thrown their support behind Capitol’s plan.
Capitol and its chief executive Andrew Harrison will now need to win over Integral’s doctor shareholders.
"We look forward to combining Capitol’s and Integral’s strengths, including the clinicians, into one of Australia’s leading healthcare services providers. Integral’s strong hospital network, combined with Capitol’s expertise will create a first-class healthcare organisation," Harrison said in a statement yesterday.
"We look forward to engaging with Integral’s highly regarded doctor partners and associates."
Capitol said the deal would create a company with $64 million annual earnings and $70 million net debt, based on 2018 financial year forecasts. Synergies from the deal have been put at $5 million a year.
The offer was pitched at a 30 per cent premium to Integral’s last close and well above the company’s IPO price of $1.91 two years ago.
Integral shares surged more than 21% to $2.30, which is well under the bid price of $2.46 (now $2.42 based on the closing price f 31 cents for Capitol shares).
Analysts say what will be of interest now is whether Sonic or Primary are drawn into a bidding way for Integral, although competition questions would emerge.
