AorTech have announced the proposed acquisition of the partner in their vascular business, RUA Medical Devices Ltd, for £2.45m. RUA Medical is a stand-alone cash-generative, medical device and development company.
The cash element of the acquisition is funded from existing resources and the stock element at £1 is a premium of 34% to the last closing price. RUA’s cost equates to 1.5x FY 2019 sales and 8.5 times EBITDA. Subject to shareholder approval, the deal should close post financial year-end and not affect our FY2020 estimates.
To us, this seems a strategically sensible move as the transaction has a number of positive attributes:
• it would transform AorTech from a virtual business into a fully formed ISO-accredited, FDA authorised medical device manufacturer.
• RUA is cash generative in its own right, with revenues that have grown from £0.6m in 2013 to £1.6m in the year to April 2019.
• The full internalisation of the Vascular business will double AorTech’s margin when the products are commercialised.
Upon completion our fair value would change slightly to £101.2m or 689p/share (previously £99.2m or 676p/share) on a pro forma basis that takes account of the additional shares issued.
