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Paragon Care Ltd acquires medical distributor business

Paragon Care Ltd (ASX: PGC) is a healthcare business that has been steadily buying other businesses as bolt-on acquisitions which allow it to supply more healthcare products to its clients like hospitals and aged care centres.

Late on Thursday, Paragon announced that it has agreed to acquire Anaequip Medical, a multi-agency distributor of medical products based in South Australia.

The total cost of the acquisition is $2.3 million, of which $1.84 million will be cash and $0.46 million through the issue of fully paid ordinary shares of Paragon Care.

Paragon believes that the acquisition will be modestly earnings per share accretive in FY18, which should please shareholders.

Anaequip is Paragon’s medical distributor partner in South Australia and is also a distributor for Gallay Medical.

Anaequip has long-standing relationships with a wide range of South Australian healthcare facilities in the acute, aged care, allied health and laboratory sectors.

The acquisition continues Paragon’s strategy of expanding its presence in South Australia through thought-out purchases.

One of the key rationales for the acquisition was Paragon’s new distribution warehouse located at Wingfield, South Australia. The new warehouse provides crucial infrastructure to facilitate an increased distribution footprint for Paragon in the region. The company expects the benefit of the warehouse development to begin in January 2018.

Paragon’s Chief Executive Officer, Mr Andrew Just, said “The acquisition of Anaequip is consistent with Paragon’s strategic growth plan of increasing its geographic reach through complimentary acquisitions and organic growth.”

“Anaequip has strong relationships with leading Australian medical product brands and South Australian healthcare providers, fast tracking Paragon’s regional growth in South Australia, and increasing its nation-wide presence.”

Foolish takeaway

I like the look of Paragon’s latest acquisition and it clearly fits in well with Paragon’s long-term strategy. Paragon was trading at 11x FY18’s estimated earnings with a grossed-up dividend yield of 5.42% at Thursday’s closing price. I think this offers very good value for how much growth the business could generate over the next few years.

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Returns as of 6th October 2020

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Paragon Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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