Sonic Healthcare to buy German laboratory business LADR

Sonic Healthcare will buy a German laboratory business for nearly $700m, with the deal including an option over a second business.

Sonic Healthcare managing director Colin Goldschmidt at the company's offices in Macquarie Park, Sydney.

Sonic Healthcare will buy a German laboratory group for $698m in cash and shares, and says the transaction will be earnings per share positive from day one.

The Australian-based pathology and health services company said it would pay €423m ($698m) in cash and shares to acquire Laboratory Group Dr Kramer and Colleagues (LADR), with the shares component to be worth €222m ($366.4m).

The cash component will be funded from Sonic’s existing cash and debt facilities.

“Since its establishment in 1945, LADR has been owned by the Kramer family, now in

its third generation,’’ Sonic said in a statement.

“LADR is a highly reputable market participant with more than 2800 full-time equivalent staff with its central laboratory located in the town of Geesthacht, to the East of Hamburg.

“LADR is a national laboratory participant, providing high-quality testing services delivered through a network of stand-alone and hospital-based laboratories throughout Germany.’’

Sonic said the deal, which is expected to close in the first half of calendar 2025 subject to regulatory approvals, is expected to be immediately earnings per share 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 a ROIC in excess of 11 per cent per annum expected after three years,’’ Sonic said.

“With strong cultural and operational alignment between Sonic Healthcare Germany and LADR, 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,’’ Sonic said.

“Synergies will develop incrementally and are expected to reach their full level within three years of settlement.

“Medical laboratory revenue represents over 80 per cent of LADR’s group revenue and over

90 per cent of its profit, with the remainder of group revenue derived from a medical supplies

trading and logistical services business, and a clinical services division in Northern Germany focused mainly on women’s health.’’

As well as its German operations, LADR has a presence in Poland and a small joint venture interest in Finland.

The deal will also hand Sonic a 15 per cent interest in another German laboratory business, with an option to buy the rest of the business.

“Through the acquisition of LADR, Sonic will inherit a put/call structure for the remaining 85 per cent of equity in this group and is therefore likely to acquire the balance based on a similar EBITDA multiple to that applicable to the LADR transaction,’’ Sonic said.

“The expected cash outflow for this transaction will be about €55m ($90.7m) by calendar year 2027.’’

LADR chief executive Professor Jan Kramer and the company’s chief financial officer have agreed to long-term ongoing employment with Sonic.

Sonic managing director Colin Goldschmidt said the transaction was a substantial step for Sonic in Europe.

“We are honoured and excited to commence our collaboration with the Dr Kramer family and their many local colleagues, teams and partners,’’ Dr Goldschmidt said.

“Our closely aligned respective cultures, both based on a commitment to medical leadership and high-quality medicine, augur well for a successful integration which will further strengthen our service offering to clinicians and patients, and which will also enhance

efficiencies in our operations.’’

Sonic shares closed up 0.1 per cent at $28.60, broadly in line with the S&P/ASX200 Index.