Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — Merger or Acquisition (December 2018)
36 slides from Sonic Healthcare's merger presentation, Dec 12, 2018
Slide 1: Acquisition of Aurora Diagnostics (USA) and Capital Raising
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Acquisition of Aurora Diagnostics (USA) and Capital Raising 12 December 2018 Sonic Healthcare
Slide 2: Important information and disclaimer
Important information and disclaimer This investor presentation (Presentation) has been prepared by Sonic Healthcare Limited (ACN 090 665 544) (Sonic) in relation to: • the proposed acquisition (Acquisition) of Aurora Diagnostics, LLC and its affiliates (together, Aurora) by Sonic; and • a capital r
Slide 3: Important information and disclaimer (cont'd)
Important information and disclaimer (cont’d) Financial information All references to dollars, cents, A$ or $ in this Presentation are to Australian currency, unless otherwise stated. All references to US$ are to United States currency. Sonic has a 30 June financial year end, and all references to F
Slide 4: Agenda
Agenda Page NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1 Acquisition summary 3 2 Overview of Aurora Diagnostics 6 3 Strategic rationale 10 4 Acquisition funding and equity raising 18 5 Key risks 21 6 International offer restrictions 28 7 Glossary 33 Sonic Healthcare 3
Slide 5: Overview of the transaction
Overview of the transaction Sonic has entered into a binding agreement to acquire Aurora Diagnostics, LLC (“Aurora”), for US$540m (A$750m)1 Implied acquisition multiple of 9.2x2 pro-forma EBITDA3 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Acquisition overview Acquisition continues So
Slide 6: Overview of the transaction (cont'd)
Overview of the transaction (cont’d) Acquisition funded through a combination of: A A$600m fully underwritten Institutional Placement (“Placement”)1 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Funding A fully underwritten acquisition bridge facility, which is to be subsequently refina
Slide 7: Agenda
Agenda Page NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1 Acquisition summary 3 2 Overview of Aurora Diagnostics 6 3 Strategic rationale 10 4 Acquisition funding and equity raising 18 5 Key risks 21 6 International offer restrictions 28 7 Glossary 33 Sonic Healthcare 6
Slide 8: Overview of Aurora Diagnostics
Overview of Aurora Diagnostics Aurora is one of the leading providers of anatomical pathology services in the U.S. NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Operates 32 anatomical pathology practices located in 19 U.S. states servicing approximately 23,000 referring physicians Appro
Slide 9: Key business lines
Key business lines NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Anatomical Pathology (~90% revenue) Allied services (~10% revenue) Outpatient-based practices Molecular and Next Generation Sequencing (“NGS”) testing ~23,000 referring physicians Rapidly growing segment as technology improv
Slide 10: Aurora operates a national footprint across the U.S.
Aurora operates a national footprint across the U.S. NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Cascade Pathology Services Twin Cities Dermatopathology Portland, OR Plymouth, MN Pathology Laboratory Pacific Pathology Grand Rapids, MI Seacoast Pathology Salem, OR Exeter, NH Hallmark Patholo
Slide 11: Agenda
Agenda Page NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1 Acquisition summary 3 2 Overview of Aurora Diagnostics 6 3 Strategic rationale 10 4 Acquisition funding and equity raising 18 5 Key risks 21 6 International offer restrictions 28 7 Glossary 33 Sonic Healthcare 10
Slide 12: Compelling strategic rationale
Compelling strategic rationale 1 Aurora closely aligned with Sonic’s U.S. and global patient-centric culture NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 2 Transforms Sonic’s U.S. business, providing opportunity to differentiate its Medical Leadership model 3 Adds significant scale in the at
Slide 13: The acquisition of Aurora is closely aligned with Sonic's global growth and Medical Leadership strategy
The acquisition of Aurora is closely aligned with Sonic’s global growth and Medical Leadership strategy NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Acquisition in a market in which Sonic has been operating since 2005 Complements Sonic’s existing U.S. operations and further differentiate
Slide 14: Compelling opportunity to expand Sonic's culture of Medical Leadership in the U.S.
Compelling opportunity to expand Sonic’s culture of Medical Leadership in the U.S. Core to Sonic’s business model is its culture of Medical NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Leadership, embodying quality, patient care and a deep understanding of physicians and the medical profes
Slide 15: The acquisition of Aurora will transform Sonic's U.S. business
The acquisition of Aurora will transform Sonic’s U.S. business NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Pro-forma U.S. segment revenue1 (A$m) 1,562 1,131 Key2 Sonic and Aurora presence Aurora presence only Sonic Pro-forma Sonic presence only Aurora significantly extends and complements S
Slide 16: Aurora adds significant scale in the U.S. anatomical pathology market
Aurora adds significant scale in the U.S. anatomical pathology market Large growing market Highly fragmented Technology led growth opportunities NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES ~US$16bn addressable market Significant opportunity to consolidate Significant opportunity to gr
Slide 17: The acquisition of Aurora will complement and extend Sonic's global scale and diversity
The acquisition of Aurora will complement and extend Sonic’s global scale and diversity Sonic market position Global scale and diversity Belgium New Zealand <1% Imaging NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Australia #1 3% 9% UK & Ireland SCS & Other 7% Switzerland 8% 7% UK #1 Austral
Slide 18: Aurora is a financially attractive acquisition
Aurora is a financially attractive acquisition Acquisition of Aurora is expected to be approximately 3% EPS accretive post Placement on a pro-forma NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Attractive earnings FY2019 basis, before any expected revenue and cost synergies1 and ROIC profil
Slide 19: Agenda
Agenda Page NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1 Acquisition summary 3 2 Overview of Aurora Diagnostics 6 3 Strategic rationale 10 4 Acquisition funding and equity raising 18 5 Key risks 21 6 International offer restrictions 28 7 Glossary 33 Sonic Healthcare 18
Slide 20: Acquisition funding and equity raising details
Acquisition funding and equity raising details Acquisition purchase price of US$540m (A$750m) Purchase price NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Implied acquisition multiple of 9.2x1 pro-forma EBITDA2 A A$600m fully underwritten Placement3 A fully underwritten acquisition br
Slide 21: Equity raising timetable
Equity raising timetable Event Date NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Record Date for SPP 7.00 pm Tuesday, 11 December 2018 Trading halt, announcement of the Transaction and Placement opens Wednesday, 12 December 2018 Announcement in relation to outcome of Placement Thursday, 13 D
Slide 22: Agenda
Agenda Page NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1 Acquisition summary 3 2 Overview of Aurora Diagnostics 6 3 Strategic rationale 10 4 Acquisition funding and equity raising 18 5 Key risks 21 6 International offer restrictions 28 7 Glossary 33 Sonic Healthcare 21
Slide 23: Key risks
Key risks Specific risks of an investment in Sonic (including Aurora) Government policy and regulatory changes Sonic operates in highly regulated industries and is subject to extensive laws and regulations. There are a number of government policies and regulations that, if changed, may have a materi
Slide 24: Key risks
Key risks Specific risks of an investment in Sonic (including Aurora) (cont’d) New diagnostic technologies or products The diagnostic industry is characterized by rapid changes in technology, frequent introductions of new products and evolving industry standards and client demands for new diagnostic
Slide 25: Key risks
Key risks Specific risks of an investment in Sonic (including Aurora) (cont’d) Personnel and performance risk Sonic’s ability to attract and retain experienced and high-performing key talent in its management and operational staff is critical to its success. Relationships with certain referrers may
Slide 26: Key risks
Key risks Acquisition risks Completion risk There is a risk that the acquisition may not complete on the current terms and expected timing, if at all, due to a failure to satisfy any of the conditions precedent to the SPA, which include a failure to obtain approval under the Hart-Scott-Rodino Antitr
Slide 27: Key risks
Key risks Acquisition risks (cont’d) Financial capacity of vendors If the acquisition completes, there can be no guarantee as to the on-going financial capacity of the vendor of Aurora. In these circumstances, if a warranty or other claim was made under the SPA in respect of the acquisition of Auror
Slide 28: Key risks
Key risks General risks General equity market risks As with any entity with shares listed on the ASX, the market price of Sonic’s shares is influenced by a variety of general business cycles and economic and political factors in Australia and overseas, including economic growth, interest rates, exch
Slide 29: Agenda
Agenda Page NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1 Acquisition summary 3 2 Overview of Aurora Diagnostics 6 3 Strategic rationale 10 4 Acquisition funding and equity raising 18 5 Key risks 21 6 International offer restrictions 28 7 Glossary 33 Sonic Healthcare 28
Slide 30: International offer restrictions
International offer restrictions International Offer Restrictions This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares m
Slide 31: International offer restrictions
International offer restrictions Certain Canadian income tax considerations. Prospective purchasers of the New Shares should consult their own tax adviser with respect to any taxes payable in connection with the acquisition, holding or disposition of the New Shares as any discussion of taxation rela
Slide 32: International offer restrictions
International offer restrictions New Zealand This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (the "FMC Act"). The New Shares are not being offered or sold in New Zealand (or allotted with a view to bei
Slide 33: International offer restrictions
International offer restrictions United Arab Emirates Neither this document nor the New Shares have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates, the Emirates Securities and Commodities Authority or any other governmental authority in the United
Slide 34: Agenda
Agenda Page NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1 Acquisition summary 3 2 Overview of Aurora Diagnostics 6 3 Strategic rationale 10 4 Acquisition funding and equity raising 18 5 Key risks 21 6 International offer restrictions 28 7 Glossary 33 Sonic Healthcare 33
Slide 35: Glossary
Glossary NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES ARI is the Aurora Research Institute EBITDA is earnings before interest, tax, depreciation and amortisation EPS is earnings per share and is calculated as Net Profit after Tax (“NPAT”) per share outstanding. Calculations of EPS refe
Slide 36: Sonic Healthcare
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Sonic Healthcare Thank you
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