Sonic Healthcare shares have fallen since it announced its $693m deal to buy LADR Lab Group in Germany this week, despite analysts suggesting that the transaction made sense.
The view in the analyst community is Sonic paid a reasonable multiple for the business and it made sense strategically.
Yet some investors are not happy about the level of acquisitions being undertaken by Sonic, which rely on costs being stripped out, for which it is yet to deliver on.
The deal was struck on a transaction equating to 8.5 times earnings before interest, tax, depreciation and amortisation compared to the 10 times EBITDA multiple that Sonic trades on. The acquisition was funded by a combination of 12.8 million Sonic shares worth €222m and €201m of cash.
In aggregate, Sonic expects to achieve about €25m in synergies from the acquisition, improving the margin to closer to 19.5 per cent in year three.
Analysts at Jarden highlighted in their research this week the timing risk in achieving synergies, especially with regard to closure of duplicate labs under Sonic’s federated model.
Listed in Australia with a $13.7bn market value, Sonic Healthcare is the largest laboratory medicine company in Australia, Germany, the UK and Switzerland, and is the third largest laboratory medicine company in the US.
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