Paragon Care continues multimillion dollar medical company acquisition spree

Paragon Care ASX PGC REM Systems acquisition
REM SYSTEMS has a forecast FY18 revenue base of approximately A$62m and an FY18 EBITDA of A$6.6m.

Australian healthcare company Paragon Care (ASX: PGC) intends to acquire New Zealand-based REM SYSTEMS, one of New Zealand’s most highly regarded healthcare businesses for A$50 million in a combination of cash and scrip.

The acquisition comes hot on the heels of nine previously announced buyouts, funded by a recent $70 million capital raising and represents “a near perfect strategic fit,” according to Paragon’s chairman Shane Tanner.

According to Paragon, seven of its nine acquisitions have now been completed and the remaining two (inclusive of c) are expected to be finalised by the end of Q3 2018.

REM buyout target

REM SYSTEMS was first established in 1981 by Leon and Shirley Schollum, a family-run medical equipment company that sources innovative products from the world’s leading medical and veterinary suppliers and distributes them across New Zealand and Australia.

Currently, REM has close to 4,000 customers across both Oceanic countries with approximately two-thirds of the business is based in New Zealand and the remaining third in Australia.

From its most recently-published figures, REM’s revenue base stands at NZ$68 million (A$62.7 million) with an EBITDA of NZ$7.2 (A$6.6 million) for the 2018 financial year.

As a specialised medical equipment distribution company supplying hospitals, health clinics, medical practices and veterinary clinics, it has been targeted for acquisition by Paragon Care who’ve tabled a bid of NZ$54.4 million (A$50 million) – with the offer made of up of 80% cash and 20% in fully paid ordinary Paragon shares.

The acquisition will be funded by a combination of capital obtained from Paragon’s recent A$69.8m capital raising and an increased debt facility supported by National Australia Bank (NAB).

The deal also includes an “earn out” portion over the next 3 years with the current management team keeping their positions and continuing their work within the company.

With the deal now agreed by all parties and shareholder approval not required, the acquisition is expected to “substantially strengthen” Paragon’s product offering to the Australian and New Zealand markets.

“The acquisition mirrors Paragon’s desire to provide its key customers with a product range that not only supplies quality capital items but a full range of consumables and service and maintenance options,” said Mr Tanner.

“REM and Paragon have tremendous cross-selling opportunities in both the customer and products base of the respective businesses. In particular, REM’s commanding presence in the New Zealand healthcare market and valuable product lines provides an opportunity to leverage the Paragon portfolio,” said Andrew Just, managing director and CEO of Paragon.

He added that “REM is simply a fantastic spearhead investment into the New Zealand market.”

The deal is expected to fortify the family-run business and facilitate its expansion via additional investment and expertise to be provided by Paragon.

REM director and vendor shareholder, Paul Schollum, said that the REM management team and the entire staff are “looking forward to being part of Paragon Care and the opportunities that will come with this, while also continuing to provide the high level of service that our customers and principals are accustomed to.”

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.