Ann: IDX: Integral Diagnostics & Capitol Health Proposed Merger, page-18

“If they get through due diligence – never a small task – the deal would just about close the gap between Integral and No.2 player Sonic. The bigger platform should be better able to navigate that teleradiology/AI world, with Integral having made a start on the teleradiology front.

Shareholders on both sides are claiming a win, which is rare: Capitol’s like what managing director Justin Walter has done, but are worried the stock is too small, too illiquid and too well-owned by small-cap funds to get rewarded for the gains; Integral’s understand the scale argument, and think blending the two companies’ different approach to compensating doctors is a good thing.

It’s not the first time they’ve been down this path. The smaller Capitol had a crack in late 2017, but Integral fought it tooth and nail and did some bolt-on acquisitions of its own. It took a while for the bad blood to dissipate.

Interestingly, those talks in late 2017/early 2018 also played out while sector bigwig I-MED was in play. Private equity firm Permira ended up buying it from rival EQT – its third PE owner in a row.

Whenever I-MED is in play, everyone gets a bit jumpy. It sets the tone for the sector.

Hopefully, this time around, Victoria-focused Capitol and NSW/Queensland/NZ-heavy Integral can put aside their differences long enough to get their deal done. That’s what both sets of shareholders want. Neither is a gem on its own, but together they could create value.

The risk is that a private capital group swoops in with a cash offer for either Capitol or Integral and drives a wedge between the merger partners. If that happens, watch the bad blood spill over.”


part of an opinion piece in AFR