Capitol Health gains as Integral Diagnostics slides on proposed merger
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The news: Shares in Capitol Health soared, while Integral Diagnostics shares dropped, following a proposed merger between the two ASX-listed medical imaging companies.
The numbers: Capitol Health shares were up 15.3% to $0.28, while Integral Diagnostics shares lowered 5.5% to $2.40, by 11:35am AEST.
Under the proposed merger, Capitol shareholders would receive 0.12849 Integral shares per Capitol share, with Integral and Capitol shareholders owning 63% and 37% of the combined group respectively.
The deal implies an equity value of around $350.6 million for Capitol, and an enterprise value of $413.2 million.
The two Melbourne-based companies have identified at least $10 million of anticipated annual pre-tax net cost synergies.
The context: The merger would see Integral Diagnostics CEO and managing director Ian Kadish become chief executive of the combined group.
Capitol managing director and CEO Justin Walter would be offered the transitionary role of chief integration officer, tasked with driving the integration of the two businesses.
RBC Capital Markets analysts said they viewed the two companies as "highly complementary with minimal geographic overlap", and therefore did not expect any issues with the competition regulator. They noted the proposal was an "attractive offer" for Capitol shareholders given the implied premium to its last closing share price, and saw expected double-digit earnings per share accretion for Integral shareholders which was a reasonable return.
What they said: Kadish said: "We are pleased to have reached this milestone in respect of the proposed merger of Australia's only listed pure-play diagnostic imaging practices".
"The potential combination of the two businesses is compelling and logical and would see us create a leading player in Australian and New Zealand diagnostic imaging, with the scope and scale to transform the industry," he said.
The source: ASX announcement
