The offer to take Opmedic Group private is fair, says Industrial Alliance

Opmedic Group’s (Opmedic Group Stock Quote, Chart, News: TSX:OMG) minority shareholders should accept the deal tabled by its founders to go private, says Industrial Alliance analyst Steve Li.

Yesterday, Opmedic announced it had entered into an agreement with a newly formed corporation owned by founders Dr. Pierre St-Michel, Dr. Marc Villeneuve and Dr. Jean-Yves Fontaine, to take Opmedic private for $18.1-million, or $2.90 in cash per share.

The founders own more than two-thirds of Opmedic’s outstanding shares, while institutional investors own approximately 20%. The transaction requires 50% support from minority shareholders.

The founders said the company could operate more efficiently away from the public markets.

“A privatized Opmedic Group will result in lower operating costs and enable management to focus on pursuing the corporation’s business strategy of providing quality patient care at its clinics, and enhance our ability to attract and retain quality health care professionals,” said St-Michel.

Earlier this month, in an effort to solidify its presence outside of Quebec, Opmedic announced it had acquired a majority stake in Heartland Medical Corporation and Heartland Fertility and Gynecology Clinic, which operates a well-established fertility clinic in the city of Winnipeg. The clinic represented Opmedic’s third location outside Quebec and its first in Manitoba.

Yesterday’s offer is a 23.4% premium to last Friday’s closing price and a 20.3% premium to the 20-day volume-weighted average price.

Li says despite the fact that Opmedic Group is a leader in the fertility market, it has been challenged to produce growth for several quarters running. He says that while catalysts such as a consolidation in the fertility clinic market and a ramping up of its Ontario clinics could stimulate growth, the transaction is fair and the risks of the takeout transaction being rejected are low.

In a research update to clients this morning, Li dropped his target price from $3.00 to $2.90 to reflect the takeout offer. The Industrial Alliance analyst recommends that investors tender their shares to the offer.