Empresaria Group Plc Acquisition of Pharmaceutical Strategies

Empresaria Group Plc (LON:EMR) has announced the acquisition of Pharmaceutical Strategies a provider of temporary workers to the US healthcare sector. The business is currently growing strongly and sector growth is expected to continue. The deal has been financed by a share placing which was oversubscribed and by small additional debt facility. The deal should be earnings enhancing in its first full year and the balance sheet remains in a comfortable position. The vendor’s CEO has been locked in and the deal meets a number of the group’s strategic objectives. It looks a great deal and should boost the company’s growth.
► Business: PS is a specialist recruitment group in the US healthcare market which focuses primarily on pharmacy benefit managers. Its revenues derive 100% from temporary sales.
► Cost: The deal is expected to cost approximately $12m overall with an initial payment of c. $7m, a 2016 payment based on 2015 profits, and subsequent performance based earnout payments. The deal should be earnings enhancing in the first full year in the group and the balance sheet remains strong.
► Outlook: The US healthcare market is experiencing higher patient volumes, following the Affordable Care Act. The US Department of Health and Human Services projects growth in health expenditures to average 5.8% per annum between 2014 and 2024.
► Risks: The profitability of the target has increased significantly this year, but there are structural factors supporting the market. UK companies entering the US market always take a risk, but the incumbent management will remain and are highly incentivised to perform.
► Valuation: Empresaria continues to be valued at a significant discount to its larger quoted peers. The placing has improved the liquidity of the group and should have broadened the shareholder base, which gives an opportunity for the gap to narrow.