Integral Diagnostics and Capitol Health said on Monday they had entered into exclusive talks after Integral lobbed an unsolicited all-scrip offer for its smaller peer, with Capitol's board intending to recommend that shareholders approve the deal.
The merger would create a new company owned by 63 per cent of current Integral shareholders and 37 per cent by Capitol shareholders, a combination that represents a 33 per cent premium to Capitol's share price from Friday's close.
"Today's proposed merger announcement with Integral represents an exciting opportunity for all our valued radiologists, technicians, and staff to be part of Australia's largest pure-play publicly listed imaging company," Capitol Health managing director Justin Walter said.
Capitol Health owns 65 community-based medical imaging practices, primarily under its flagship brand, Capital Radiology.
Integral Diagnostics has 90 clinics trading under names including Lake Imaging, the X-Ray Group, Imaging Queensland and Apex Radiology.
Both companies operate mostly outside Australia's largest cities, although Integral has clinics in Auckland and the outer western areas of Melbourne.
The combination would save the two companies $10 million a year and give Capitol shareholders exposure to the Queensland and New Zealand markets, the companies said.
The combined group would have 155 clinics, 350 radiologists and 3000 employees and, based on 2022/23 figures, $651 million in revenue.
"The potential combination of the two businesses is compelling and logical and would see us create a leading player in Australian and New Zealand diagnostic imaging, with the scope and scale to transform the industry," said Dr Ian Kadish, Integral chief executive and managing director.
Capitol Health shares finished up 10.2 per cent to 27c while IDX shares dropped 4.3 per cent to $2.43.
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