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ASX-listed Integral Diagnostics makes NZ foray with $105M buy-up of radiology clinics

Tuesday 29th May 2018

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ASX-listed Integral Diagnostics has secured a New Zealand beachhead, spending $105 million in cash and scrip for four Auckland radiology clinics. 

Melbourne-based IDX today announced the acquisition of three Auckland businesses operating four radiology clinics in New Zealand's biggest city that have projected annual earnings before interest, tax, depreciation and amortisation of $13 million-to-$14 million in the 2019 financial year, the Australian company said in a statement. IDX will take on 14 Kiwi radiologists from Specialist Radiology Group, Trinity MRI and Cavendish Radiology, paying $80 million in cash and $25 million in shares, with a five-year staged earn-out based on the companies' operations. 

Specialist Radiology + MRI was set up by principal consultant Quentin Reeves in 2007 and expanded to Canvedish Drive in Manukau in 2015. Reeves' interests are the controlling shareholders of SRG and Cavendish, with junior shareholder Alpenglow Australia, which operates 16 radiology sites across the Tasman. Trinity MRI's biggest shareholder is Maurice Moriarty at about 25 percent, with the firm's other radiologists holding smaller stakes. 

"Joining the New Zealand clinics with our Australian business will create a significant, best-in-class diagnostic imaging platform in a collegiate trans-Tasman partnership," said managing director Ian Kadish. "The clinics have a demonstrated track record of achieving strong revenue growth at market-leading profitability and add significant value to IDX." 

IDX's ASX-listed shares jumped 7.1 percent to A$2.795, adding to a 13 percent gain so far this year. The stock rose as high as A$2.81, a record since the diagnostics firm went public in 2015. 

SRG was rumoured to be on the block last month, with the Australian Financial Review's Street Talk column reporting Allier Capital was drumming up interest for a potential buyer. NZX-listed medical services investor Abano Healthcare completed the sale of its 71 percent stake in Ascot Radiology for $17 million. 

Australia's IDX fended off a cash and scrip takeover bid earlier this year by smaller rival Capitol Health, saying it wasn't fair or reasonable and that its own future as a standalone business was attractive. 

IDX's acquisition is at a forward earnings multiple of between 7.5 times and 8.1 times, depending on how the 2019 result plays out, comparable to the Capitol Health's A$24.7 million purchase of Radiology Tasmania last year. 


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