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Sonic Healthcare to Acquire Anatomical Pathology Provider Aurora Diagnostics

NEW YORK (360Dx) – Australian firm Sonic Healthcare announced Wednesday it has entered into a binding agreement to acquire US anatomic pathology provider Aurora Diagnostics for $540 million.

With 32 anatomic pathology practices across the country and approximately 220 pathologists, Aurora has itself grown through acquisitions. The company, which is based in Palm Beach Gardens, Florida acquired Cascade Pathology Services in Portland, Oregon earlier this year, and made five acquisitions in 2017. Collectively, Aurora's labs process approximately 2.5 million accessions per year received from more than 23,000 referring physicians.

Aurora generated pro forma revenue of approximately $310 million in the 12 months ending September 30, 2018.

For Sydney-based Sonic, one of the largest clinical laboratory services providers in the world, the acquisition gives the company a larger stake in the US market with a strategic national footprint and platform that adds significant scale, particularly in anatomic pathology, the company said.

"The integration of these practices into Sonic's existing US operations, in conjunction with Aurora's management team, will offer Sonic Healthcare USA the scale and critical mass to boost the national promotion of Sonic's unique medical leadership model in the US laboratory and pathology markets," Sonic CEO Colin Goldschmidt said in a statement.

The addition of Aurora's 220 pathologists to Sonic's more than 700 pathologists globally creates one of the largest pathology groups in the world, according to Sonic. The company stated that it sees the US anatomic pathology market as a growing and fragmented market supported by attractive macro tailwinds.

The two companies have also both targeted partnerships with hospital labs. Sonic has entered into several joint ventures with hospitals, such as its two-year-old joint venture lab agreement with Western Connecticut Health Network and more recently a new joint-venture announced in August with ProMedica Health System in Ohio. Aurora provides hospital lab management services ranging from test utilization support to medical directorship services to more than 170 community hospitals and surgical centers around the country, Aurora Diagnostics Executive Vice President and Chief Operating Officer Bruce Walton and Chief Medical Officer Michael Walsh said in an interview with 360Dx in January.

Sonic views the acquisition as complimentary to its existing US presence geographically because it provides a platform for Sonic to expand its clinical pathology business in regions where it does not currently operate, the company stated.

The company also listed as a strategic rationale, the financial attractiveness of the acquisition. The acquisition of Aurora is expected to be approximately 3 percent EPS accretive on a pro forma fiscal 2019 basis, before expected revenue and cost synergies. The transaction is expected to close in early 2019, subject to customary approvals.

Sonic announced the acquisition would be funded by an A$600 million ($433.4 million) placement and a fully underwritten acquisition bridge facility, which will be refinanced post completion. The placement will be offered to professional and institutional investors at a price of A$19.50 ($14.09) per share, which represents an 8.8 percent discount to the last closing price of A$21.39 ($15.45) on Tuesday Dec. 11.

The integration of Aurora into Sonic's US operations will be led by US CEO Jerry Hussong with support from Goldschmidt and Sonic's global Chief Medical Officer Stephen Fairy, in conjunction with Aurora's management team.