Shares of Vancouver-based CRH Medical (TSX:CRH) rose sharply today after the company announced it had acquired Gastroenterology Anesthesia, a large provider of anesthesiology services to gastroenterologists in the southeastern United States.
Under the terms of the agreement, CRH will pay (U.S.) $58.6-million for the company, plus an extra $14.6-million with four-and-a-half-years based on performance, bringing the total potential acquisition price to $73.2-million.
The deal will transform the balance sheet of CRH, which earned (C)$2.49-million on revenue of $7.68-million in fiscal 2013, which it reported in March. Gastroenterology Anesthesia posted EBITDA in excess of (U.S.) $16-million on revenue of more than $25-million in its most recent fiscal year.
“The immediate increases in revenues and EBITDA from this transaction are transformational for CRH,” said CEO Edward Wright. “Our strong relationships with gastroenterologists as a result of our current business were instrumental in not only identifying the opportunity but throughout the process of acquiring GAA. From this foundation, we look forward to enhancing our reputation as a trusted partner to the gastroenterologist community and will pursue additional opportunities within our core competencies.”
CRH will finance the deal through cash it has on hand, in addition to senior and subordinated credit facilities from Knight Therapeutics, who will supply (U.S.) $30-million , and Crown Capital Partners, who will fork over $20-million.
CRH Medical was formed in 2000, but kicked into gear in 2006 when it began to market its lead product, the CRH O’Regan System, a single use, disposable, hemorrhoid treatment, in the US. Co-founder Tony Holler and CFO Richard Bear were no strangers to success, having just sold groundbreaking flu-vaccine maker ID Biomedical to GlaxoSmithKline for $1.7 billion. After luring retail expert Edward Wright from Cartier, the company rejigged its marketing strategy, moving away from a capital intensive retail clinic model towards a strategy in which the company sold through gastroenterologists.
Shares of CRH Medical closed today up 42.9% to $1.50.