DC DiagnostiCare enters U.S. market with North American Imaging deal

NAI will be company's first U.S. acquisition

Acquisition-minded imaging services firm DC DiagnostiCare of Edmonton, Alberta, agreed to buy its first U.S. company last month when it signed a letter of intent to purchase all outstanding shares of North American Imaging (NAI), a privately owned, independent supplier of medical imaging components.

DiagnostiCare will pay an estimated $9.5 million (Canadian) for Camarillo, CA-based NAI, subject to due diligence. The acquisition gives the Canadian medical imaging services supplier an entrée into hospital-based asset management. The deal is expected to close June 30.

Since the beginning of the year, DiagnostiCare has acquired 60 nonhospital-based medical imaging clinics across Canada. The company's aggressive marketing strategy has paid off: It now owns a total of 94 clinics throughout Alberta, Manitoba, Ontario, and British Columbia. The company expects to double its roster of clinics by next year and will continue to focus its acquisition efforts on the more than 1200 nonhospital-based clinics across Canada, according to Chuck Moser, DiagnostiCare's director of investor and public relations,

DC DiagnostiCare was formed in the early 1990s, when Don Little and Don Cameron, DiagnostiCare's current CEO and CFO, respectively, saw a need for MRI clinics in Canada, which historically has had a much lower MRI scanner-to-patient ratio than the U.S. Along with other investors, Little and Cameron purchased three MRI machines and installed them in clinics in Vancouver and Edmonton. The company listed on the Vancouver stock exchange in July 1996 and used its IPO proceeds to buy a chain of clinics, upping its network to 33. DiagnostiCare employs about 300 people.

By acquiring NAI, a glassware supplier experienced in working with asset management programs in the U.S., DiagnostiCare gains strong support in its effort to crack the Canadian market for these services. The deal also gives the company an annual revenue gain of $18.5 million, NAI's estimated gross sales for the fiscal year ending May 31.

NAI supplies replacement medical imaging components such as x-ray glassware to imaging facilities and OEMs. Established in 1985, NAI employs 39 people and has roughly 33% of the U.S. glassware market, as well as 15% of the Canadian market. Replacement glassware represents 20% of a hospital's service budget, according to Robert Dempster, NAI's CFO. The DiagnostiCare deal offers the company a way to grow its Glass Plan program, a cost-control service for x-ray glassware, in both Canadian clinic- and hospital-based asset management.

North American Imaging will remain at its Camarillo headquarters. DiagnostiCare's Don Little will serve as chair, and NAI's president, Peter Dempster, will continue with the firm. The companies expect combined revenues to approach $100 million (Canadian) in the next fiscal year, Robert Dempster said.

Despite its foray into the U.S. imaging industry, DiagnostiCare does not anticipate purchasing U.S. medical imaging centers, according to Moser. Such a move would put DiagnostiCare in competition with U.S.-based heavyweights like Medical Resources and U.S. Diagnostic.

"I wouldn't say never, but at this point, we've got our hands full with the opportunities here in Canada," he said. "We know the market. We know what it takes to cut overhead and do centralized accounting and purchasing. It's working too well here to jeopardize it by going into areas with which we're not familiar."