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Ebos Group Ltd EBO

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Morningstar’s Analysis

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Corporate Action: We Recommend Long-Term Investors Do Not Participate in EBOS’ SPP

Shane Ponraj, CFA Equity Analyst

Analyst Note

| Shane Ponraj, CFA |

Narrow-moat EBOS is acquiring 100% of LifeHealthcare and 51% of its Asian subsidiary, Transmedic, for AUD 1,204 million including transaction costs. On a 100% consolidated basis, this represents an enterprise value of AUD 1,275 million or an EV/EBITDA multiple of 11.4 on expected earnings in calendar 2022. To fund the acquisition, EBOS is raising AUD 642 million from an underwritten share placement, AUD 23 million from new shares issued to LifeHealthcare management, AUD 540 million from a new debt facility and AUD 100 million from a share purchase plan, or SPP. The SPP offer opens on Dec. 15, 2021 and closes Jan. 17, 2022, with new shares to be issued at the lower end of the NZD 34.50 placement price and the five-day volume-weighted average price up to the close of the retail offer. The acquisition is subject to closing conditions including regulatory approvals and change of control consents from key manufacturers, but we credit LifeHealthcare earnings from fiscal 2023.

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Company Profile

Business Description

EBOS is the largest pharmaceutical wholesaler and distributor across Australia and New Zealand. It services community pharmacies and hospitals, which contribute around 60% and 30% of revenue respectively. Drug pricing and wholesale margins for PBS medicine are governed by the Australian government’s Pharmaceutical Benefits Scheme, or PBS. Wholesale gross margins are capped at 7% for community pharmacy and 10% for hospitals, and ongoing price reform typically results in low single digit revenue growth. Aside from pharma distribution, EBOS operates an animal health product wholesale, manufacturing and retail business, as well as undertaking third party logistics services. These segments run at 5% and 8% of revenue respectively but due to the unregulated nature are higher-margin operations.

108 Wrights Road, P.O. Box 411
Christchurch, STL, 8024, New Zealand
T +64 33380999
Sector Healthcare
Industry Medical Distribution
Most Recent Earnings
Fiscal Year End Jun 30, 2022
Stock Type
Employees 3,700