Business & Investment

Stock Rally: M & A to drive the growth of this Canadian stock

In an interesting development, Well Health Technologies (TSX: WELL) Are getting CRH Medical (TSX: CRH) US $ 4 per share, including the CRH line of credit, is equivalent to a share consideration of approximately US $ 293 million and a transaction value of approximately US $ 369 million.

As a result, CRH Medical’s share price soared 80%, approaching a buyout price of $ 4 per share, and WELL Health’s share price soared 12% in good news.

Growth stocks are growing through acquisitions

Since 2020, WELL Health’s stock has been 5 baggers, almost 6 baggers. The COVID-19 pandemic has probably accelerated the growth of WELL Health because of its mission to digitize the Canadian healthcare industry. For example, many patients can talk to their doctor over the phone or virtually without face-to-face contact.

M & A is an important part of WELL Health’s growth story. In 2020 alone, WELL completed eight acquisitions, including in the areas of electronic medical records and cybersecurity. Therefore, revenue growth in the last 12 months has been around 262%, growing at an above average pace.

Good news for Canadian growth stocks

Usually, the stock of the acquiring company is in the news. But instead well health stocks have risen. There is a good reason for that.

CRH offers innovative products and services for the treatment of gastrointestinal (GI) diseases in 13 states in the United States, which is equivalent to approximately 440,000 cases per year on a practice rate basis. In addition, there are thousands of GI partners in all 48 states of the continental United States.

Hamed Shahbazi, Chairman and CEO of WELL, said in a recent press release: “The CRH acquisition offer is a great opportunity to apply WELL’s expertise in digitizing and modernizing medical clinics to GI practice in the United States. In addition, WELL will allocate capital to generate CRH profitability and cash flow. , You will have ample opportunity to grow without diluting. “

WELL management expects the acquisition of CRH to increase significantly soon. This includes approximately 120% on a revenue per share this year and 800% on an EBITDA basis.

CRH is expected to continue to operate under its current leadership and continue its M & A program.

The CRH transaction is expected to close in the second quarter of 2021. In particular, this transaction requires regulatory approval, CRH shareholders (two-thirds majority vote), and court approval.

How Growth Equity Funds This Acquisition

CRH Medical is a relatively large acquisition compared to WELL’s previous acquisitions. WELL Health is funded by three sources: 1) Sir Lee Jia Ming and a major North American financial institution, $ 9.80 per share, $ 295.5 million in non-intermediary placement, 2) credit line, and 3) cash on hand. I am procuring.

With hundreds of millions of millionaires being early investors in the company, Li Ka-shing’s continued support for well health makes sense. He started investing in stocks in 2018 when he was trading at just $ 0.33 per share. Since then, WELL Health has been 27 baggers since its initial investment.

Stupid takeaway

Analysts currently have a 12-month price target of $ 10.20 per growth stock. This indicates that the WELL Health strain is still reasonably undervalued.Apparently CRH Medical The acquisition is very beneficial to well health. This will significantly expand WELL’s US operations and significantly increase WELL’s revenue and cash flow now and in the future.

If you are looking growth For Canadian tech stocks, WELL Health stocks should be considered strongly. The future looks bright and stocks are still of good value.

This is a growing stock that you want to dig deeper into!

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Stupid contributor Cain I own a stake in Well Health. Motley Fool owns and recommends a stake in CRH Medical.

Stock Rally: M & A to drive the growth of this Canadian stock Stock Rally: M & A to drive the growth of this Canadian stock

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