ASX-listed Sonic Healthcare Limited (AU:SHL) has announced the acquisition of Germany-based laboratory group LADR for an enterprise value of €423 million, bolstering its presence in the German healthcare market. Also, the company highlighted a strong cultural and operational fit with LADR, offering significant synergy potential across its various operations. Following the announcement, SHL stock gained 0.18% as of writing.
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Sonic Healthcare provides laboratory and primary care medical services in Australasia, Europe, and North America. Meanwhile, LADR is among Germany’s leading laboratory groups, operating for almost 80 years. Moreover, it has operations in Poland and Finland. With this deal, Sonic Healthcare will broaden its reach across the European region.
Regarding agreement details, Sonic will issue up to €222 million in shares to the sellers, with the remainder paid in cash from its existing funds and debt facilities.
Exploring the Financial Benefits of the Deal
This strategic acquisition is set to substantially enhance Sonic’s earnings per share (EPS) and return on invested capital (ROIC) within the next three years. The deal is projected to boost EPS immediately, with high single-digit growth anticipated within three years. Additionally, Sonic expects the ROIC to surpass its cost of capital, exceeding 11% annually after synergy benefits are realized within the same period.
Meanwhile, LADR will generate approximately €370 million in annual revenue and €50 million in EBITDA (earnings before interest, tax, depreciation, and amortization), according to its 2024 projections.
Is Sonic Healthcare a Buy?
In terms of share price appreciation, analysts are cautious about SHL stock’s potential. Despite the company’s positive outlook for FY25, they expect that ongoing cost inflation will continue to impact margins.
Overall, SHL stock has a Hold consensus rating based on one Buy, four Holds, and one Sell assigned in the last three months. At AU$27.54, the average Sonic Healthcare share price target implies a downside of 3.57%.
