Recently, Sonic Healthcare confirmed that it has acquired Pathologie Trier, one of the largest and most respected anatomical pathology practices in Germany. Pathologie already combined the traditional practice of histo- and cytopathology with cutting-edge ancillary testing, including molecular pathology and tumor genetics services. There will be no management changes in Pathologie Group. It was reported that Pathologie Trier had annual revenue of ~€20 million and employed ~160 staff, including 24 pathologists. It operates four laboratories in three West German cities, being Trier, Düsseldorf and Düren, with the latter two laboratories strategically located within large hospital facilities.
The initial acquisition price was funded in Euro from Sonic’s existing debt facilities and 25 per cent of the total purchase price will be subject to a 3 year revenue-based earnout provision. From the return perspective, the initial return on invested capital (ROIC) exceeded Sonic’s cost of capital, and the transaction is earnings per share (EPS) accretive by 1-1.5 per cent. Both ROIC and EPS will increase as synergies relating to procurement and logistics are achieved. The purchase price will be tax deductible in Germany for over 15 years as goodwill amortisation. This transaction will add value to Sonic’s anatomical pathology services and to its genetic and clinical laboratory testing. The stock (ASX:SHL) was up by 0.45 per cent and was trading at $24.7. (as on 3 July 2018; 03:30 PM AEST). Sonic is trading close to its 52-week high price and looks on an expensive side.
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