The Monash IVF Group Ltd (ASX: MVF) share price jumped nearly 5% yesterday after announcing the acquisition of another fertility clinic.
Monash IVF has been one of the strongest performers on the ASX over the past two months, rising nearly 30%. The strong momentum continued yesterday as the company announced they had acquired Fertility Solutions, a Queensland based provider of fertility services.
Who Are Monash IVF?
Monash IVF Group is a leading provider of assisted reproductive services. Basically, they assist couples who wish to have children but for one reason or another have difficulty in conceiving a child naturally. Technology has come a long way since the first IVF pregnancy back in 1973 and Monash IVF is at the forefront of these developments.
The Acquisition
Monash IVF has agreed to acquire Fertility Solutions for a purchase price of $2.1 million with the possibility of additional earn-out payments over a four-year period until June 30, 2023. Management said they expect to complete the transaction during the first quarter of the financial year subject to all conditions being met.
Fertility Solutions was established in 2007 and have two clinics operating out of Bundaberg and Buderim on the Sunshine Coast. As a result of the purchase, Monash IVF will gain access to a further six fertility specialists who will be integrated into the Monash IVF clinician network.
“Fertility Solutions is a high quality business providing an excellent geographic and cultural fit with Monash IVF,” Monash IVF CEO Michael Knaap said.
“Monash IVF currently has no presence in the attractive markets of the Sunshine Coast and Bundaberg, and the acquisition is consistent with our strategic priority of establishing a more balanced business portfolio across Australia.”
Given Monash IVF has a market capitalisation in excess of $300 million, the acquisition of Fertility Solutions is only very minor with the purchase price representing less than 1% of the company’s value. Viewed in this context the acquisition hardly seems noteworthy. However, I believe investors view it as a more important purchase from a strategic perspective.
In the current low-interest rate environment, investors are being chased out of cash and are desperately searching for places to invest their capital with an eye to growth. The fact that management stated that they expect the acquisition to be profit/earnings accreditive right from the beginning is likely to have caught the eyes and ears of investors.
Time To Monash IVF?
The Monash IVF share price has some strong positive momentum right now but I will be waiting to see the release of their FY19 financial statements and surrounding management commentary before considering buying any shares.
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Disclosure: At the time of publishing, Luke has no financial interest in any companies mentioned.
