Moving to boost its revenue by more than 50%, American Health Services Corp. in Newport Beach said Thursday that it has agreed to buy another diagnostic imaging company in a transaction valued at $18 million.
Upon completion, the transaction would make American Health Services one of the biggest operators of fixed-site diagnostic centers in the country, according to the company and industry experts.
Clarke Underwood, American Health Services’ chief financial officer, said the company’s purchase of American Diagnostics Group, a Tampa, Fla., company with 13 imaging centers mostly in the Midwest, is contingent upon negotiation of a definitive agreement. Among the issues still to be ironed out, he said, is how the transaction will be financed.
Underwood said he expects that payment for the privately held firm will consist of a combination of cash, notes, American Health Services stock and assumption of debt. He said he is confident that the purchase of American Diagnostic Group, a wholly owned subsidiary of American Capital Group Inc., will be completed by the end of the year.
He said American Health Services, which operates nine diagnostic imaging centers in joint venture with hospitals and hospital physicians at medical centers scattered from Los Angeles to New Jersey, has a national expansion strategy. He said American Health Services has embarked on the acquisition in part because American Diagnostic Group has imaging centers in different geographical areas.
“To be a successful imaging company and develop an investor following, you need to be a national company,” he said. With the acquisition and opening of additional centers now on the drawing boards, American Health Services expects to have 29 high-tech diagnostic centers in operation by the end of the year.
Underwood said the acquisition of American Diagnostic Group would also result in a cost savings by merging the corporate administration of both companies. “For a very small increase in corporate costs, we will increase the size of our company by 50%,” he said.
He also predicted that the acquisition would help to boost American Health Services into the black next year for the first time since the public company was founded in 1983. In 1987 the company posted revenue of $5.7 million and a loss of $4.9 million. This year Underwood is forecasting that the company will have revenue of $16 million and a slight loss.
The proposed acquisition, he said, would increase the company’s revenue to at least $26 million.
Underwood said the diagnostic imaging side of American Health Services always has been profitable, but the company’s large investment in developing a treatment for nicotine and drug addiction has more than offset that profit.