With its shares down 25% in the last three months, shareholders of IVF specialist Virtus Health Ltd (ASX: VRT) finally had something to smile about yesterday.
Its shares jumped almost 3% after the company announced that it has acquired the Aagaard Fertility Clinic in Aarhus, Denmark. The company will pay DKK85 million ($16.5 million) on a cash free/debt free basis.
This values the clinic at approximately 7x normalised earnings before interest, tax, depreciation, and amortisation (EBITDA) and pleasingly management expects it to be accretive to earnings in FY 2017.
CEO Sue Channon had this to say in the deal:
"Scandinavia is an attractive market for Virtus, with a number of operational and regulatory similarities with Australia, including a good legislative framework for Assisted Reproductive Services. The Aagaard clinic is another example of where we will be able to leverage our leading minds, leading science philosophy for the benefit of patients, professional development of our team and ultimately shareholder return."
This will be the third international market that Virtus Health has entered in the last few years and not the last it would seem. Management revealed that it continues to seek value accretive expansion opportunities in Europe and Asia to add to existing operations in Ireland and Singapore.
Whilst I'm pleased to see the company expand further, I think it is too early to say whether this acquisition will be a success.
At this point in time Virtus Health's international operations are not exactly a huge selling point in my opinion. After all, Ireland operates on significantly lower margins than the domestic business and Singapore is still loss-making.
So for now I continue to believe arch rival Monash IVF Group Ltd (ASX: MVF) is the better option in the industry for investors. At 15x full year earnings and expected to provide a fully franked 4.8% dividend in FY 2017, now could be a great time to pick up shares.
