The Infratil Ltd (ASX: IFT) share price is on the rise today after the company announced it plans to acquire up to 60% of Qscan Group Holdings Pty Ltd from Quadrant Private Equity. At the time of writing, the Infratil share price is up 2.66% to $5.40 after reaching as high as $5.55 in morning trade. The potential deal is for a total cash equity consideration of up to $330 million. Qscan is a comprehensive diagnostic imaging practice with locations throughout Australia. The Infratril share price is responding positively to an implied enterprise value (EV) to earnings before interest, taxes, depreciation and amortisation (EBITDA) of 12.7-14.1.
What's moving the Infratril share price?
In June 2020, Infratil raised additional equity of NZ$300 million to pursue its growth agenda and take advantage of investment opportunities that may arise. This capital paid down bank facilities and, consequently, can be used to fund the Qscan acquisition, news of which is driving the Infratril share price higher today. Infratil has made the offer in conjunction with the Morrison & Co Growth Infrastructure Fund (MGIF), which has conditionally offered to acquire up to ~15% of Qscan.
Qscan grew from initially operating a single clinic and hospital contract. Today, it is a group operating a portfolio of 70+ clinics across Australia. This includes a network of 10 clinics offering Positron Emission Tomography (PET) in oncology.
The acquisition, if successful, will provide Infratril with a foothold in the very lucrative healthcare diagnostics and imaging sector. At present, the company has invested in defensive shares, such as Tilt Renewables Ltd (ASX: TLT).
The Qscan investment will be managed by Morrison & Co on behalf of Infratril and MGIF. Moreover, it is conditional on doctor and management shareholders holding the equivalent of ~25% to 32.5% of the business post-close. This therefore requires reinvestment of some of the proceeds into the new holding vehicle. Furthermore, investors in the Infratril share price appear happy with the shared risk, and the diversification into medical imaging.
Management commentary
Marko Bogoievski, CEO of Infratil said of the acquisition:
Qscan provides a high-quality entry point into a sector with structural long-term growth and potential to scale into a leading healthcare infrastructure platform…
The Diagnostic Imaging sector benefits from long-term demographic tailwinds and technological advances that will allow it to play a growing role in the early detection of diseases such as cancer. Ultimately, increased investment in Diagnostic Imaging will reduce overall healthcare system costs while improving patient outcomes.
Paul Newfield, head of Australia and New Zealand for Morrison & Co, commented:
Qscan is a market leader in a growth industry. It has a secure revenue base backed by strong referral networks. In addition, there is a track record of strong, profitable growth, with significant further growth potential, Qscan is also known for the quality of its Doctors and the strength of their sub-specialty expertise.
