UDG rises on $82m acquisition splurge

Geoff Percival

UDG Healthcare is expected to pursue more acquisition opportunities on top of spending an aggregate $82.4m (€71m) on two US companies.

Shares in the Dublin-based healthcare services group, previously known as United Drug, jumped 2% on the back of it announcing the purchase of New York-based consulting/analytics business SmartAnalyst; and Create NYC, a “disruptive” creative communications agency based in the same city.

The former is being bought for $24m, with Create NYC being picked up for $58.4m. Both purchases will strengthen UDG’s commercial and medical services division, Ashfield, in North America.

Merrion analyst Darren McKinley said the purchases should boost UDG’s 2019 earnings by around 6% before any synergy benefits and should enhance share value.

UDG is currently trading at around £8.40, but Merrion has raised its 12-month price target for the stock to £9.30 on the back of the announcement of the deals.

“UDG Healthcare shares are currently trading at the same level that they traded in June 2017, despite earnings per share estimated to grow by around 20% on the previous year,” said Mr McKinley.

“Given that both acquisitions are within the high-growth division of Ashfield, we see potential for investors to react positively to these transactions,” he said.

Mr McKinley also said UDG’s strong balance sheet - net debt still only being 0.5 times earnings post these acquisitions — “should permit them to do further bolt-on acquisitions”.

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