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PhotoMedex, Inc. (NasdaqGS and TASE: PHMD), a global skin health company, which has been traded on the Tel Aviv Stock Exchange (TASE) it merged with Israel company Radiancy, has acquired LCA-Vision, Inc. (NasdaqGS: LCAV), a laser vision correction services under the LasikPlus brand, company, for $5.37 per share in cash, or $106.4. PhotoMedex has a market cap of $280 million. When the deal is done, LCA-Vision will operate as a wholly owned subsidiary of PhotoMedex.
The Boards of Directors of both PhotoMedex and LCA-Vision have voted unanimously in favor of the transaction, which is expected to close in the second quarter of 2014. LCA-Vision’s operations are expected to be accretive to PhotoMedex’s cash EPS in 2014, excluding one-time, transaction-related items.
“The combination of these synergistic businesses holds potential for powerful financial leverage and profitable long-term growth by providing a platform to establish company-owned XTRAC Psoriasis and Vitiligo Centers of Excellence and clinical dispensing of Neova products in LasikPlus facilities, ” said Dr. Dolev Rafaeli, PhotoMedex Chief Executive Officer. “We have a tremendous opportunity to leverage the LasikPlus infrastructure and customer-centric staff, which are the best in the industry yet presently underutilized.
Rafaeli added, “At PhotoMedex we have a proven ability to generate dermatology patient traffic, and now we will have the national footprint to scale-up those efforts in an immediate and meaningful way while bringing recurring reimbursed patient revenue and economies of scale to LasikPlus centers. We expect this to be transformational to our XTRAC business. On average, psoriasis patients are treated with XTRAC twice per week for three to six weeks, twice a year and over the course of many years. In contrast, the current LCA-Vision model has virtually no repeat business and is mostly a private-pay procedure. We believe that with minor modification to the layout of the LasikPlus clinics, the professional and technical LASIK staffs will be able to offer dermatology patients the same high level of care and customer service with only modest staffing increases and incremental training.”
There are no layoffs planned at LCA-Vision, and all 62 LasikPlus vision centers in the U.S., including 52 full-service LasikPlus fixed-site laser vision correction centers and 10 pre- and post-operative LasikPlus satellite centers, are expected to remain intact.
PhotoMedex plans to build on the current LCA-Vision strategic expansion of service offering to bolster cataract and intraocular lens procedures, and to expand the optometrist referral network, all of which are currently underway. The addition of XTRAC and Neova offerings to each center will improve center-level economics and will allow PhotoMedex to strategically evaluate expansion of the clinic network.
“For several years it has been a priority for LCA-Vision to pursue diversification of our revenue stream while at the same time becoming less reliant on a procedure that is closely tied to consumer confidence and macroeconomic factors. This business combination with PhotoMedex represents a compelling, immediate solution to leverage our established system by offering fully reimbursed, laser-based medical procedures, ” said LCA-Vision Chief Executive Officer Michael J. Celebrezze. “The people of PhotoMedex are expert marketers for consumer health, wellness and beauty products with a proven ability to run efficient operations while supporting innovation. Combining our two companies provides for an exciting future for my LCA-Vision colleagues, while offering a compelling premium to LCA-Vision stockholders with the certainty of all-cash terms.”
PhotoMedex will fund this transaction through a new $85 million senior secured credit facility including a $10 million revolving credit facility and a $75 million four-year term loan, as well as through existing cash balances.
On a pro forma basis, the combined company had revenue for the 12 months ended September 30, 2013 of approximately $308 million, gross profit of approximately $244 million, gross margin of approximately 79% and adjusted net income of approximately $36 million. The pro forma combined cash position as of September 30, 2013 was approximately $78 million.
“We expect this transaction to be accretive to our 2014 cash EPS, excluding one-time, transaction-related items. Also, we expect approximately $5 million in annualized cost-savings and efficiencies to be fully achieved as we enter 2015, ” said Dennis McGrath, PhotoMedex President and Chief Financial Officer.