CML HealthCare Income Fund, Mississauga, Ontario, has entered into a definitive agreement to acquire Baltimore-based American Radiology Services (ARS) for $151 million.
ARS operates 17 imaging centers in Maryland and Delaware and, in conjunction with the Johns Hopkins University-based 68-radiologist group American Radiology Associates (ARA), PC, Baltimore, performs 2.2 million imaging procedures annually. ARS also provides primary and secondary reading for 25 hospitals via teleradiology across seven states.
CML HealthCare is a leading provider of laboratory testing since 1971, and became Canada’s largest provider of non–hospital-based imaging services when it acquired DC DiagnostiCare and its 146 clinics in five Canadian provinces.
Canadian companies are demonstrating a clear appetite for US imaging companies. Three years ago, Toronto-based investment firm Onex Corp acquired Minneapolis-based Centers for Diagnostic Imaging for $225 million, followed by its acquisition of Kodak Healthcare, Rochester, NY, now known as Carestream Health, in January 2007.
CML HealthCare president and CEO Paul Bristow cites ARS’s strong management team, its relationship with a pedigreed university-based radiology group, and its teleradiology operation as factors that led to the planned acquisition. He also cites ARS’s geographic concentration in the Mid-Atlantic states. In a press release, Bristow says, “Accordingly, ARS is well positioned to exploit growth opportunities, while continuing to deliver best-in-class patient care.”
Bristow plans to leverage ARS’s advanced digital network and informatics savvy to accelerate CML’s digitization efforts among its Canadian clinics. “We also expect to benefit from other ARS resources, including: access to exceptional radiologists and training programs; being able to offer our own referring physicians access to advanced imaging modalities, such as PET/CT scanning; [and] innovative sales and marketing programs,” he says, in addition to opportunities to evaluate new and complementary health care services jointly, both in Canada and in the United States.
Bob Carfagno, ARS president, praises CML’s strong financial and operational track record. He says, “As part of CML HealthCare, we look forward to moving ahead with our strategic focus on becoming the leading radiology group in the Mid-Atlantic region, through our commitment of resources to develop an organization that achieves both medical and operational excellence, and major market share in the counties where we operate, as we expand our geographic coverage,” according to the same release.
CML HealthCare has secured a fully underwritten commitment for a C$450-million credit facility from the Toronto-Dominion Bank. The credit facility will provide up to C$350 million to fund the acquisition of ARS and repay CML HealthCare debts, if required, and a C$100-million revolving credit facility for general corporate purposes, including future acquisitions.
ARS senior management and Johns Hopkins and ARA radiologists who are current shareholders of ARS are invited to retain minority equity interests in ARS; to the extent that such interests are retained, the purchase price and CML HealthCare’s ownership of ARS will be reduced.
CML HealthCare Income Fund is an unincorporated open-ended trust that owns CML HealthCare Inc.
American Radiology Services: