“Sonic Healthcare (SHL) has signed binding agreements to acquire LADR Laboratory Group Dr. Kramer & Colleagues (LADR), one of the top five medical laboratory groups in Germany,” Raymond said.
“In calendar year 2024, LADR’s revenues are expected to be approximately around A$610m, with an EBITDA €50m (approximately A$82m).
“We calculate that represents approximately 7% of SHL’s total revenue.
“The agreed cash and debt-free expected value (EV) for LADR is €423m.
“This will be satisfied by issuing SHL scrip to the sellers, with a maximum value equivalent to around €222m, and the balance through cash.
“The cash component will be funded in Euro from Sonic’s existing cash and debt facilities.
“The transaction is expected to be immediately earnings per share (EPS) accretive, reaching high single-digit percentage accretion after three years, including synergies.
“The return on invested capital (ROIC) will significantly exceed Sonic’s cost of capital once synergies are achieved, with an ROIC more than 11% per annum expected after three years.
“Significant synergy potential exists in multiple areas of operations, including procurement, laboratory overlaps, specialised testing, logistics, equipment maintenance, and the supply and distribution of medical consumables. Synergies will develop incrementally and are expected to reach their full level within three years of settlement.
“Established in 1945 and owned by the Kramer family, LADR is a highly reputable market participant with more than 2,800 full-time equivalent staff. Its central laboratory is located in Geesthacht, east of Hamburg. LADR provides high-quality testing services through a network of stand-alone and hospital-based laboratories throughout Germany.
“LADR also has a presence in Poland and a small joint-venture interest in Finland. The Polish laboratory operates under the brand ‘badaj.to’ and is believed to be the fourth largest laboratory group in Poland.
“Included within the EV is a 15% interest in a separate German medical laboratory business, with annual revenue of approximately €25m. Sonic will inherit a put/call structure for the remaining 85% of equity in this group, with an expected cash outflow of around €55m by CY 2027.
“The transaction is subject to customary closing conditions, including antitrust clearance, and is expected to close in the 1HCY25.
“SHL have a good track record in identifying key acquisitions international and have historically integrated with them well. We maintain a positive stance on this stock as a core portfolio holding,” Raymond said.
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