"Anteo Diagnostics & Diasource Merger - The Numbers and more..."

Since the initial announcement of the Anteo / Diasource merger back on the 26th August 2015 I have been reasonably quiet on the transaction. Mainly because I wanted to see a higher probability of the transaction going ahead and how the financing was going to be structured.

Before I go into the numbers below I have to say Anteo management along with their corporate partner Ferghana Partners have negotiated what looks to be a very good acquisition/merger.

I also wanted to put this post together to try and get as much of the information on the merger in one place for future reference.

The following information has been gathered from ASX announcements and other websites and some of my own thoughts and views. Please do your own research and make your own decisions when investing.


Who are Diasource?

DIAsource is a vertically integrated specialty diagnostics company that develops, manufactures, markets and distributes clinical diagnostics products in the fields of endocrinology, especially bone metabolism, fertility, cardiovascular and oncology. DIAsource is a truly international company that services customers in 75 countries worldwide; and sells products both directly and through a global network of 90 main distributors and 40 OEM partners.

DIAsource has a highly flexible supply chain with a fully IVD certified production facility to manufacture its complete catalogue of antibodies, ELISA and RIA assays. The Company’s headquarters, comprising 4,500 square meters located in Louvain-La-Neuve near Brussels, combines offices and laboratories with a fully integrated manufacturing and storage facility.

Quote from Anteo CEO Dr Geoff Cumming when merger announced :

“Not only will the combined group transition Anteo towards a cash flow positive position; it also delivers a truly global presence through which both DIAsource’s and Anteo’s products can be sold. The transaction also brings a world-class (ISO, US FDA and CE IVD certified) manufacturing facility to Anteo and our shareholders.”


The Numbers...

  • Purchase Price for DIASOURCE = $15.4m EURO / $23.3m AUD
  • DIASOURCE reports revenue on a January to December period
  • DIASOURCE 2014 revenue = $11.9m Euro / $18m AUD
  • DIASOURCE JAN - JUN 2015 revenue = $7.2m Euro / $10.9m AUD
  • 2015 Average EBITDA 20.6%
  • Have completed "5th consecutive revenue growth quarter"
  • Earn out component = Maximum $7.3m EURO / $11.1m AUD - Earnout is based on revenue/gross profit/EBITDA targets agreed to in purchase  contract (Listed Below in graph)


Funding package...

  • $10m EURO Convertible note ( $14.7m AUD )
  • 10% Coupon 
  • 48 month term for Principal & Interest
  • Convertible note acceptance approved as of Friday 18th December 2015
  • Entitlement offer through a rights issue to shareholders of 1 to 5.35 shares at 7.5 cents per share to raise $12m 
  • Shares issued for $12m AUD at 7.5 cents = 160,000,000 new shares
  • New capital structure = Previous shares on issue = 857,314,493 plus 160,000,000 = 1,017,560,193
  • Convertible Note - Minimum 15c conversion price / $500k Euro per tranche


Other stuff...

  • During BRR Interview with Anteo CEO Dr Geoff Cumming and Diasource Chairman Rolf Sickman there was some important information and that is the merger when complete will be backdated to January 1st 2015 - So full 2015 year revenue/EBITDA and profits will belong to the newly formed Anteo group as of 31st December 2015 when the transaction will take place.
  • Also during the interview Rolf Sickman mentioned revenue guidance for the 2015 year of around $20m AUD at over 20% EBITDA margins
  • At the Anteo 2015 AGM in Sydney which I attended it was stated that Diasource owns their premises freehold - During Anteo's due diligence they got the premises valued at $5.2m EURO which was around $2m above the Diasource book value - This provides an asset which Anteo can leverage off in reducing the convertible note at a later stage if they chose to. *(Just to add after completion of blog post and receiving messages from a couple of fellow shareholders - The information on the details around the freehold building are not that clear. I will leave this in here but will amend in the future as more information becomes available) 
  • I would estimate Diasource would have a cash balance of at least $2m EURO after their 2015 performance add to this the $5.2m valued premises which could be sold and leased back makes this look like a very good deal for existing Anteo shareholders.


Some ASX Biotech comparisons...

Post merger Anteo will truly become a different company. One that will now have a global presence for manufacturing and distribution channels. More importantly they will look totally different from a revenue and financial basis. They will have combined group revenues of over $20m AUD with many growth opportunities in healthcare, diagnostics, medical devices and pioneering into Energy with batteries for example Lithium Ion batteries for cars and home energy storage.

See below some other listed ASX Biotech companies and their market caps :

  • Firstly post merger Anteo will have 1,017,560,193 (Depending on final allocation of rights issue) - This would put Anteo market cap at 7.5 cents of $76m 
  • 15 cents for Anteo around $150m MCAP / 20 cents - $200m MCAP
  • Remembering that the $10m EURO convertible note could be half paid off roughly if Anteo sold the Diasource premsies and leased them back - (All speculation on this scenario - just outlining a possibility)

Some brief comparisons below :

Some comparisons :

$NAN  - Nanosonics - Revenue 2015 FY  - $22m Rev AUD / $15m AUD - GP

They have a market cap of $460m - with $45m cash - so about $415m EV

$MVP - current MCAP around $200m

"Medical Developments International Limited. (“MVP”) (ASX: MVP) delivered a Net Profit after Tax of $1.529 million for the year ended 30 June 2015. Sales grew 24% to $11.608m, whilst Earnings Before Interest and Tax grew 191% to $2.251 million."

$PME - 2015 $17.5m revenue / $5m ebitda / MCAP - $313m

Not hard to see that Anteo in my opinion post the merger should be closer to 15c - 20c share price then the current 7.5c rights price. 


Some more stuff...


BRR Interviews


Health Professional Radio Interview