Deal a shot in the arm for AMG, Life Healthcare
• Move will unlock significant value for Life Healthcare shareholders and aid AMG in supporting Europe’s healthcare needs
After receiving several unsolicited proposals from third parties to acquire its European diagnostic and molecular imaging business, Life Healthcare announced the disposal of Alliance Medical Group (AMG) just seven years after its acquisition.
The deal, valued at about R21.3bn (including debt), will unlock significant value for shareholders and position AMG to continue supporting Europe’s evolving healthcare needs.
AMG operates 233 sites and delivers more than 1.1-million scans per year across the UK and 10 other European countries. It is a trusted partner to a number of public health authorities across the UK and Europe, including the NHS (UK and Ireland), ASL (Italy) and HSE (Ireland). AMG also provides services to private paying patients.
The group comprises the following operational subdivisions: diagnostic imaging services, molecular imaging services, radiopharmacy services and other services such as ultrasound scans and X-rays. Life Modular Imaging will remain with Life Healthcare post the transaction — a move requiring a complex group restructure.
Life Healthcare acquired 94% of AMG in 2016, for an equity value of about R10bn. In the past six years, its revenue has grown by 63%, measured in GBP. In the financial year ending September 2022, it contributed 27.2% of Life Healthcare’s revenue. The purchase price represents a significant premium realised to the implied value of AMG, based on a sum of the parts, representing 47.8% of the group’s market capitalisation (pre-February cautionary).
CAPEX NEEDS
Alliance Medical Group has significant capex needs going forward. From a shareholder’s perspective, the transaction de-risks the delivery of the AMG business plan. The funds managed by iCON Infrastructure are active investors in European healthcare infrastructure and are well placed to support and develop AMG’s vertical, integrated pan-European imaging platform.
The transaction will result in improved return on capital metrics, as well as improving overall cash conversion, resulting in a material reduction in the group’s gearing to about one times net debt to normalised ebitda.
A resilient, flexible balance sheet with strong cash generation ability will provide headroom to invest in growth and enable Life Healthcare to return R8.4bn to shareholders, the majority of which will be via a special dividend and, to a lesser extent, via share buybacks.