Hospital group Pulse Health has continued its aggressive east coast expansion trail with the $33.6 million acquisition of a NSW mental health clinic.
The deal means the company now has nine hospitals in its expanded portfolio. The company, whose shares have increased this year, said it would continue to review a range of acquisitions and developments.
The deal would see the company make a cash payment of $27.7m to acquire the Hills Clinic in Sydney, which is Pulse’s third major transaction in 10 months. There is also additional capped earn-out payments of $5.9m in aggregate, subject to achievement of 2015 and 2016 revenue targets for a maximum consideration of $33.6m. Pulse Health also earned long-term lease options for the hospital property of up to 30 years.
Pulse, an integrated health services provider, has in its portfolio private hospitals, day surgeries and community home care, and recruitment agencies.
Following a $30m capital raising last year, the company acquired the North Mackay Private Hospital in Queensland and followed that with the acquisition of another new specialist surgical hospital on Queensland’s Gold Coast in November. The group’s aggressive growth strategy has seen its stock shoot up almost a quarter since December. Shares rose 9.3 per cent yesterday to 53c.
The company said the Hills Clinic deal was a “beachhead” acquisition in what it called the attractive mental health market.
“The Australian mental health market was worth an estimated $6.9 billion in 2010-2011, with demand for and use of mental health services anticipated to grow by as much as 6 to 7 per cent per year over the next 15 years,” the company said. “Initial market analysis conducted by Pulse Health has indicated high levels of unmet demand.”
The Hills Clinic has 59 beds and recently opened a specialised young adult ward for 16- to 25-year-olds. Pulse outlined that key clinicians at the centre remained committed to having ongoing relationships with The Hills Clinic and Pulse Health, post transaction.
Pulse said the transaction would be funded by a new $42m debt facility, with NAB, and cash reserves. “Agreed debt facility terms are a significant improvement on previously agreed terms, and include acquisition, asset finance and general working capital lines.