The Sonic Healthcare Limited (ASX: SHL) share price won't be going anywhere today after the international medical diagnostics company placed its shares into a trading halt.
The halt was requested so that Sonic Healthcare could launch a A$600 million institutional placement and accompanying A$100 million share purchase plan to part fund the acquisition of U.S. based Aurora Diagnostics.
These funds will be raised at A$19.50 per share, which represents an 8.8% discount to the last close price.
According to the release, Sonic Healthcare has entered into a binding agreement to acquire 100% of Aurora Diagnostics for US$540 million (A$750 million).
Aurora is one of the leading providers of anatomical pathology services in the United States with ~220 pathologists and 32 practices processing approximately 2.5 million accessions per year, received from ~23,000 referring physicians.
For the 12 months to September 30, Aurora Diagnostics generated pro-forma revenue of approximately US$310 million (A$431 million) and pro-forma EBITDA of approximately US$59 million (A$82 million). This implies an acquisition multiple of approximately 9.2x pro-forma EBITDA.
It is expected to be approximately 3% EPS accretive post placement on a pro-forma FY 2019 basis, before any expected revenue and cost synergies.
Management believes the "transaction will transform Sonic's U.S. business, providing it with a strategic national footprint and platform that adds significant scale and extends Sonic's existing presence in anatomical pathology."
In addition to announcing the acquisition, management released a trading update for its U.S. business in FY 2019. That update revealed that its U.S. business is tracking ahead of expectations this year.
Should you invest?
This looks to be a good move from management and I expect that its placement and share purchase plan will be well supported by investors.
However, at the current level I think its shares are close to fully valued. As such, I would sooner pick up the shares of fellow healthcare peers CSL Limited (ASX: CSL) and ResMed Inc. (ASX: RMD) instead.
