Ebos branches out with $36.5m deal

Ebos is paying A$34 million ($36.5m) to buy the LMT and National Surgical businesses in its first foray into the A$8 billion medical devices sector.

Ebos yesterday said it doesn't expect the two businesses — which generate about A$40m in annual revenue — to have a material impact on earnings for the year ending June 2020. But they are “expected to meet the group's return-on-capitalemployed hurdle of 15 per cent within two years.”

The businesses are active in Australia, New Zealand and the Pacific region, and provide products and services in the areas of orthopaedic, spine, neuro, ear-nose-and-throat, plastics and sports medicine.

“The acquisition represents an important development in the group's growth trajectory as it is the first step in building another significant platform to our healthcare portfolio,” Ebos chief executive John Cullity said in a statement.

“Medical device distribution presents a natural adjacency to our existing capability and offers strong economic fundamentals and promising organic growth rates,” he said.

In August, when Ebos reported a marginal increase in annual net profit to $137.7m, the company estimated it had about $300m-$350m available for acquisitions while keeping debt low.

The company has a long track record of growth through usually small, “bolt-on” purchases, although it has made the occasional large acquisition.

It spent $93.6m on acquisitions in the year ended June.

Ebos told shareholders at their annual meeting yesterday that trading for the September quarter was “in line with our internal expectations and we reconfirm the group is confident of a significant increase in earnings in the current financial year.”

It will have the benefit of winning the Chemist Warehouse Group supply contract that kicked in from July 1 and is expected to add about $1b to annual sales.

The company's revenue was $6.9b in the year ended June.