Diagnostic and genetic analysis specialist Source BioScience (SBS) is ready to pounce on controlled environment products provider Vindon Healthcare (VDN: AIM), proposing to make a takeover bid 44% above yesterday's share price.
Nottingham-based Source BioScience provides its services to the healthcare industry including the NHS and private companies, as well as academic institutions, biotechs and pharmaceuticals. The Vindon deal would give Source BioScience a presence in the US and is part of management’s strategy to enhance its offering and move into new geographic markets.
Source BioScience chief executive Nick Ash told Shares that the potential deal is exciting: ‘The risk that we do not make this business work is very low because both business are cash generative and profitable.’
Rochdale-based Vindon has struggled to produce consistent profit growth, illustrated by a weak share price since late 2009. Source BioScience’s all-cash proposal of 13.7p per share values the company at £12.2 million. The deal would be funded by debt and through a placing.
Vindon provides blood banks, plasma freezers and incubators among its products and services, made a £1 million pre-tax profit in 2010. This increased to £1.1 million a year later before dropping to £950,000 in 2012. Its cashflow from operating activities was also down, making £1.5 million in 2012 versus £1.6 million generated in 2011.
Source BioScience's investors may have concerns over the mooted bid premium, reflected by a 1.2% drop in its share price to 10.25p, but the opportunistic deal could prove fruitful if it can achieve or improve Vindon's earnings growth forecast by analysts. The target is expected to make £1 million pre-tax profit in 2013, rising to £1.4 million in 2014, according to consensus.
Securing Vindon would follow April’s (30) acquisition of Inverclyde Biologicals, which helped Source BioScience establish an overnight DNA sequencing service in Scotland.