Optima Health deal 'materially accelerates' growth plans, says broker

Core Viewpoint - RBC Capital Markets maintains an 'outperform' rating on Optima Health PLC and a price target of 240p following the £100m acquisition of People Asset Management Healthcare, which solidifies Optima's leading position in the UK occupational health market with a 15% market share in a £1.6bn industry [1][2]. Group 1: Acquisition Details - The acquisition of People Asset Management Healthcare, one of the top four outsourced providers, removes a key competitor and accelerates Optima's medium-term revenue target of £200m and adjusted EBITDA target of £40m, aiming for a 25% market share [2]. - The £100m acquisition consideration is approximately 12.2 times the 2025 adjusted EBITDA and will be financed through £70m of existing bank facilities and a £30m interest-free bridge loan from Optima's largest shareholder [3]. Group 2: Financial Projections - RBC forecasts combined revenue of £205m and adjusted EBITDA of £28.5m for 2027, indicating a 13.9% margin, including £1m in cost synergies, with estimated earnings per share of around 14.1p, reflecting a 2.5% accretion in the first year [5]. - Cost synergies are expected to increase to £4.5m by year three, with earnings accretion projected to exceed 20% by 2029 [5]. Group 3: Valuation and Market Position - RBC anticipates leverage to rise to approximately 2.7 times net debt to EBITDA at completion, with a reduction to about one times within three years due to PAM's cash conversion rate exceeding 60% [4]. - A pro forma equity value of 255p per share is calculated based on a 10.5 times multiple of 2027 enterprise value to adjusted EBITDA, aligning with discounted cash flow valuation methods [6]. - The acquisition is seen as a strategic enhancement to Optima's scale and market position, with execution and regulatory timing being critical near-term factors [7].