Ophthalmic equipment manufacturer Ellex Medical Lasers Limited (ASX: ELX) announced on 24 December 2019 that it has entered into a binding agreement, worth $100 million, with Lumibird Group for the sale of its Lasers and Ultrasounds business.
Ellex, headquartered in Adelaide, Australia, focuses on the designing and manufacturing of ophthalmic laser technology solutions. The company’s solutions aid ophthalmologists in achieving innovative treatments for a range of diseases including glaucoma, age-related macular degeneration (AMD), and secondary contract, among others.
Ellex has a global presence with subsidiaries in the US, Australia, Germany, France and Japan. The company operates under three segments: Lasers and Ultrasounds, iTrack™, and 2RT®.
Details of the Lasers and Ultrasounds Business sale
Ellex and Lumibird Group, a France based manufacturer and distributor of high-performance lasers, announced an all-cash deal worth $100 million under which the latter will acquire the former’s Lasers and Ultrasounds business, subject to adjustments related to iTrack™ and 2RT®.
Highlights of the proposed transaction:
· $100 million cash transaction which is ~50% higher than the revenue of the Lasers and Ultrasounds segment in FY2019 (ended 30 June 2019);
· Lumibird will acquire Ellex’s brands including Tango™, Ultra Q™, Integre Pro™, and Ellex Eye Prime™, among others;
· Ownership of Ellex’s Australia-based manufacturing facility will transfer to Lumibird; and
· Transaction recommended by Ellex’s Board of Directors.
Ellex will seek shareholders’ approval for the proposed transaction at the extraordinary general meeting (EGM), which will happen towards the end of March. The deal is projected to close before April 2020.
Post Transaction Events
With a revenue contribution of ~80% for FY 2019, Lasers and Ultrasounds segment sale will have a substantial impact on the total revenue and the asset base of Ellex. Pro-forma net cash position for the company, post-transaction, is projected to be ~$97 million. The company will be debt-free after the close of the deal.
Ellex aims to concentrate on devices for treatment of glaucoma (iTrack business) and 2RT® for AMD. The company intends to return the funds received from the sale of the business to the shareholders. ELX may offer a special dividend, a share buyback option or capital return to the shareholders.
Also, Ellex plans to remain listed on the ASX focusing on its manufacturing facility in California for iTrack business and a strong sales network across Europe, the US, and Asia-Pacific.
Reinstatement to Official Quotation
Ellex had requested for a suspension of securities from quotation on 28 November 2019 as the announcement concerning the proposed sale of its key business segment was pending. On 12 December 2019, the company requested for an extension to the suspension of its securities for quotations.
Post the release of the business segment sales, it was announced that the securities of Ellex would be reinstated to official quotation.
FY 2019 Financial Performance (year ended 30 June 2019)
Ellex’s revenue for FY 2019 reached $81.637 million, an increase of 3% over FY 2018 numbers. EBITDA loss stood at $1.027 million, slightly better than $1.055 million reported in the previous year. Net loss before tax (EBT) was $5.656 million as compared to $5.157 million in FY 2018. Net loss after tax stood at $5.773 million, an increase over FY 2018 figures ($5.074 million) primarily due to the growing investment in glaucoma business.
Among the three segments of the company, Lasers and Ultrasounds contributed approximately 80% of the total revenue followed by iTrack™ (~18%) and 2RT® (~2%).
The revenue generated from the Laser and Ultrasound segment decreased by 3% compared to the previous year primarily due to weak H2 2019 performance. The major contributor to sales was Selective Laser Trabeculoplasty (SLT) laser sales which went up by 10% to reach $32.43 million. The retinal disease franchise and cataract and vitreous opacities lasers sales were down 2% and 23% respectively.
The Ellex iTrack surgical system global unit sales grew 29% to reach $14.324 million. The performance was driven by a higher selling price in the US, coupled with a weaker Australian dollar compared to the US dollar. Ellex’s 2RT, a retinal rejuvenation therapy laser, witnessed a substantial growth in sales in FY 2019 (up 260% to reach $1.91 million).
ELX stock was trading at $0.760, moving up by 3.401 percent (at AEDT 1:26 PM) as on 30 December 2019. The number of outstanding shares for the company was approximately 143.6 million.
The stock has a 52 weeks high price and low price of $0.900 and $0.500, respectively. The shares of the company went up 28.95% and 32.43% on three months and six months basis, respectively.
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