The EBOS Group Ltd (ASX: EBO) share price is on watch this morning as the company undertakes a capital raise ahead of a $1.1 billion acquisition.
The pharmaceutical wholesaler and distributor is set to purchase the Australian and New Zealand subsidiaries of LifeHealthcare, as well as 51% of the Asian subsidiary, Transmedic.
LifeHealthcare is one of the largest distributors of third party medical devices, consumables, capital equipment, and in-house manufactured allograft material in Australia, New Zealand, and South-East Asia.
The EBOS share price is frozen at $34.70 as it initiates what's expected to be a $742 million capital raise.
Let's take a closer look at what's going on with EBOS on Thursday.
EBOS share price frozen amid acquisition announcement
EBOS believes acquiring LifeHealthcare will diversify and enhance its portfolio. It will also create an entry point for EBOS in the Asia Pacific region.
The remaining portion of Transmedic will be retained by its co-founders. They will continue to manage the business. EBOS states it has entered into arrangements to acquire the remaining 49% of the business "in the medium term".
The purchase will cost the ASX giant $1.167 billion. The company expects the acquisition will bring in between $110 million and $114 million of earnings before interest, tax, depreciation, and amortisation (EBITDA) in 2023.
To fund the acquisition, EBOS is undertaking a non-underwritten retail offer to raise up to $100 million. It is also undertaking a $642 million placement.
The placement will see EBOS shares offered at a price of $32.75 (converted from New Zealand dollars at the current exchange rate). That represents a 5.5% discount on EBOS's previous closing price.
The retail offer will be open to eligible shareholders. It will see the company's stock offered for the placement price or the 5-day volume weighted average price, whichever is lower. The company may accept over-subscriptions.
EBOS will also put $540 million from new term loan debt facilities towards the purchase. EBOS will fund the remaining $23 million by issuing 700,000 new shares to LifeHealthcare management.
The acquisition is subject to several conditions, including regulatory approval. EBOS expects to complete the acquisition by the end of this financial year.
Over FY2021, LifeHealthcare brought in $326 million in pro forma revenue and $92 million in pro forma EBITDA.
EBOS trading update
The EBOS share price is also in focus due to a trading update provided by the company this morning.
Over the first 4 months of FY2022, the company's net profit after tax grew by 14% on that of the prior corresponding period.
EBOS's healthcare segment revenue increased by 10.4%, while its animal care segment revenue rose by 14.3%.
The EBOS group's earnings before interest and tax also increased by 13.1% year-on-year.
Looking to the future, the company expects that acquiring LifeHealthcare will deliver low double-digit percentage earnings per share (EPS) growth in 2022.
Additionally, EBOS expects its FY2022 dividend to represent between 60% and 80% of its net profit after tax.
