TIDMEKF
RNS Number : 1393N
EKF Diagnostics Holdings PLC
28 September 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014,
AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL)
ACT 2018 AND CERTAIN OTHER ENACTING MEASURES ("UK MAR").
EKF Diagnostics Holdings plc
("EKF", the "Company" or the "Group")
Acquisition of US based Advanced Diagnostic Laboratory LLC
All-share initial payment for earnings enhancing, cash
generative acquisition
New testing capacity complements test kit manufacturing and
point-of-care diagnostic instrument business
EKF Diagnostics Holdings plc (AIM: EKF), the AIM-listed
point-of-care business , announces that it has agreed to acquire,
pursuant to the terms of a securities purchase agreement dated 27
September 2021 ("SPA"), the entire issued capital of Advanced
Diagnostic Laboratory LLC ("ADL Health"), a Texas based PCR-focused
testing laboratory certified under the Clinical Laboratory
Improvement Amendments ("CLIA") for high complexity testing, for an
initial consideration payment of $10 million payable in shares on
completion, with further performance-based consideration payable
over the following three years as detailed below (the
"Acquisition").
ADL Health's CLIA-certified laboratory covers the fields of
clinical, forensic and microbiological tests . The business has ISO
15189 Medical Laboratory accreditation giving it recognition in 44
countries and reflecting ADL Health's commitment to high standards.
Using its expertise in Polymerase Chain Reaction (PCR) testing, ADL
Health also provides COVID testing needs for dozens of Fortune 500
companies and government agencies. In addition, ADL Health is
expanding its range of testing capabilities across a broader suite
of healthcare applications. Under EKF's ownership, further
investment is anticipated to support the deployment of additional
equipment and personnel in order to service customer demand.
ADL Health was founded in May 2020 by a management team with
over 60 years' experience in the diagnostics field. Unaudited
management accounts for the six months to 30 June 2021 showed
revenue of $6.3 million and earnings before interest, taxes,
depreciation and amortisation ("EBITDA") of $2.6 million. ADL
Health has grown significantly since inception and the management
teams of EKF and ADL Health consider that the business has
continuing, strong growth prospects as part of the enlarged EKF
Group. While the growth of ADL Health has been accelerated by
revenue from COVID testing, its wider testing offer, including
current and planned capabilities, is considered by the EKF Board to
provide an attractive platform to both complement and broaden the
Group's existing diagnostics capabilities.
The ADL Health business is cash generative and the Acquisition
is expected to be immediately earnings enhancing. The initial
share-based consideration is subject to a two-year lock-up, with
earnout payments subject to lock-up and orderly market
arrangements, as described below.
Mike Salter, President of EKF Diagnostics' Americas and Chief
Executive Officer Designate of EKF, commented: "We are delighted to
have agreed terms for the acquisition of ADL Health and believe
this represents a highly attractive and earnings accretive
transaction. Strategically this is an excellent move for us as it
positions EKF as a leading provider of diagnostic products and
services, including a testing offering that our industry partners
have been looking for us to provide.
"The ability to offer testing for a wide range of diseases,
combined with our existing point-of-care device, reagent, sample
collection, kitting and manufacturing services, positions us as a
single provider able to encompass all products and services from
'sample-to-result'.
"It is also reassuring to EKF's shareholders that the vendors of
ADL Health have been willing to accept all of the up-front
consideration in shares, with further paper available as part of
the earnout structure. This reflects their confidence in our shared
vision for the future of the enlarged business and EKF's recently
revised strategy for accelerated growth."
Stanley Crawford III, COO and Founder of Advanced Diagnostic
Laboratory added: "We are excited to become a member of the EKF
Diagnostics family. The combination of a premier CLIA lab with a
powerhouse such as EKF not only creates a whole new capability for
the Group but also provides the combined Group compelling
opportunities to drive growth by meeting more of our clients'
needs."
Transaction details
Completion
Pursuant to the terms of the SPA, EKF has agreed to establish a
special purpose Texas limited liability company as a wholly owned
subsidiary, so that ADL Health is able to merge with the newly
incorporated company and file a certificate of merger or other
instrument with the Secretary of State of the State of Texas,
effecting the merger under Texas law.
Completion of the Acquisition ("Completion") will occur at such
time as the certificate of merger has been duly filed with and
acknowledged by the Secretary of State of the State of Texas. The
certificate of merger was filed on Monday 27 September 2021 and is
expected to be acknowledged in the next one to two weeks.
Up-front consideration
The up-front consideration payment will be paid upon Completion
and will be satisfied by the issue of new ordinary shares
("Consideration Shares") in the capital of the Company. The value
of the Consideration Shares will be equal to the initial purchase
price of $10 million, less the sum of certain amounts payable by
ADL Health to third-party service providers which will be made by
EKF on behalf of ADL Health.
The value of the Consideration Shares will be c alculated using
the average of the closing middle market quotation for an ordinary
share of EKF for each of the five working days immediately
preceding the date of Completion. The number of Consideration
Shares will be confirmed in a subsequent announcement.
Additional consideration
Subject to the EBITDA performance of ADL Health for each of the
three yearly periods ending on the first, second and third
anniversaries of completion, additional consideration will be
payable to the vendors of ADL Health ("Earnout Payments").
Provided always that the ADL Health's EBITDA ("ADL EBITDA") for
the relevant period (as set out below) is not less than $5 million,
EKF shall make Earnout Payments to the vendors calculated as
to:
(1) 30% of ADL EBITDA for the period from the day following
completion to the first anniversary of completion; plus
(2) 20% of ADL EBITDA for the period from the day following the
first anniversary of completion to the second anniversary of
completion; and
(3) 10% of ADL EBITDA for the period from the day following the
second anniversary of completion to the third anniversary of
completion
The aggregate Earnout Payments are capped and will not exceed
$60 million. The Earnout Payments will be satisfied by the further
issuance of EKF ordinary shares covering 50% of each Earnout
Payment, with the remaining 50% to be satisfied at the discretion
of the ADL Health vendors in either cash or further EKF ordinary
shares. The price per share issued to satisfy any Earnout Payment
will be calculated using the average mid-market closing price of
EKF's shares for the five working days immediately preceding the
issuance date of such shares. If the share price falls below 60
pence during the earnout period and subject to prior consultation
with the vendors in good faith, EKF has the right to satisfy any
Earnout Payments using cash only.
Lock-ups and orderly market arrangements
The Consideration Shares will be subject to a lock-up period of
two years commencing on completion. Certain sales are permitted
under the lock-up provisions as outlined below, provided always
that EKF and its brokers have given their prior written consent and
any such sale is effected through EKF's brokers in such manner as
they may reasonably require with a view to maintaining an orderly
market in the trading of EKF shares:
(1) after the date that is sixty (60) days following completion,
the vendors may sell in aggregate up to twenty percent (20%) of the
total number of Consideration Shares held by them collectively;
(2) after the date that is six (6) months following completion,
the vendors may sell up to a total of fifty percent (50%) of the
total number of Consideration Shares (including any such shares
sold under (1) above); and
(3) after the first anniversary of the completion date, the
vendors may sell all of the Consideration Shares held by them.
In certain limited circumstances, the maximum permitted selldown
amounts or timings may be increased or shortened respectively, at
the discretion of the Company and its nominated adviser.
In addition, any shares issued in the capital of EKF as
consideration or part consideration for the first Earnout Payment
above will be subject to the same restrictions as the Consideration
Shares, i.e. they will be locked up until the second anniversary of
Completion and subject to the same phased selling restrictions
which are applicable from the date of issue of such shares. Any EKF
shares issued in respect of subsequent Earnout Payments will be
subject to an orderly market requirement that all sales will be
effected through the Company's brokers.
Admission of the New Ordinary Shares to trading on AIM and Total
Voting Rights
Application will be made for admission of the relevant number of
Consideration Shares to trading on the AIM Market of the London
Stock Exchange ("Admission"), which is expected to occur as soon as
practicably possible after Completion. A further announcement will
be made confirming Completion and the expected Admission date, at
which time the Company's Total Voting Rights will also be
updated.
The Consideration Shares will, when issued, be credited as fully
paid and will rank equally in all respects with the existing
ordinary shares, including the right to receive any dividend or
other distribution declared, made or paid after Admission.
EKF Diagnostics Holdings plc www.ekfdiagnostics.com
Christopher Mills, Non-executive Chairman Tel: +44 (0)29 2071 0570
Julian Baines, CEO
Richard Evans, FD & COO
N+1 Singer (Nominated Adviser & Joint Tel: +44 ( 0)20 7496 3000
Broker)
Aubrey Powell / George Tzimas / Tom
Salvesen
Investec Bank plc (Joint Broker) Tel: +44 (0)20 7597 4000
Gary Clarence / Daniel Adams
Walbrook PR Limited Tel: +44 (0)20 7933 8780 or ekf@walbrookpr.com
Paul McManus / Lianne Cawthorne Mob: +44 (0)7980 541 893 / +44 (0)7584 391
303
About EKF Diagnostics Holdings plc ( www.ekfdiagnostics.com
)
EKF is a leading point-of-care diagnostics and central
laboratory assay manufacturer with an estimated 80,000 hemoglobin,
hematocrit, HbA1c, glucose and lactate analysers in regular use
across more than 100 countries. EKF specialises in developing tests
for use in anemia and diabetes diagnosis and management, as well as
providing a portfolio of reagents for use in clinical chemistry
analysers.
EKF specialises in the development, production and worldwide
distribution of point-of-care analyzers and clinical chemistry
reagents for use in hospital and research laboratories, doctor's
offices, blood banks and for in-field anaemia screening programmes.
EKF is also a bulk manufacturer of enzymes and has custom
manufacturing facilities in the across sites in the US, UK and
Europe for a variety of life science products. Demand for contract
manufacturing of COVID-19 sample collection tests and kits has
grown dramatically during the pandemic, however the capabilities
can be applied to other areas of diagnostic testing, molecular
disease and forensic test manufacture.
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END
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