PSS World’s Diagnostic Imaging unit signs deal to purchase Gilbert X-Ray

Acquisition will expand DI’s coverage in Texas

Any speculation that PSS World Medical’s radiology distribution subsidiary, Diagnostic Imaging, had fallen off its steady diet of acquisitions was put to rest last month. Diagnostic Imaging announced on Aug. 31 that it has signed a definitive agreement to acquire the shares of independent imaging distributor Gilbert X-Ray of Dallas. DI will pay cash for Gilbert stock, pending approval by Gilbert shareholders.

The acquisition signals DI’s continuing effort to expand its reach nationwide. Before signing the agreement, Jacksonville, FL-based Diagnostic Imaging had little coverage in Texas. Once the deal is closed, Gilbert will contribute five Texas branch locations to DI’s operations, for a total of 32 across the country, according to Kirk Zambetti, CEO of the Diagnostic Imaging division. DI’s four existing sites serving Texas will be incorporated into Gilbert locations.

“Gilbert has an incredible market share in Texas, and Texas is a critical marketplace for us from a geographical standpoint,” Zambetti said. “Our primary focus is to be coast-to-coast, to be the first national distribution company focused on local needs, and we’re doing that by acquiring key regional or local distributors. Gilbert is one of the very best regional distributors in the country.”

The agreement may indicate that PSS World Medical has recovered from an acquisition slowdown it experienced following the purchase of Gulf South Medical Supply of Jackson, MS, in December 1997. PSS World’s stock fell about 40% following the deal after revelations surfaced regarding differences in the interpretation of accounting principles between the two firms (SCAN 8/5/98). PSS World was required to renegotiate some of its acquisition deals that were based on the pooling of stock interests, according to Zambetti.

The fact that DI was able to resume its acquisition pace reflects the continuing opportunity for consolidation in the distributor market. Regional distributors have had difficulty standing as independent entities, due to a lack of access to national contracts, according to R.F. Sanford, Gilbert’s president. The company had decided to sell in order to survive in a competitive market.

“(As an independent distributor), you have no choice of customers unless you have national contracts and are part of a national organization,” Sanford said.

DI hopes the deal with Gilbert will strengthen its position as an imaging equipment distributor. In the last year, the subsidiary has focused on acquiring companies like General X-Ray of St. Louis, S & W X-Ray of Rochester, NY, and MIS of Little Rock, AR, all entities strong in imaging equipment distribution.

There will be no personnel changes as a result of the Gilbert acquisition, according to Zambetti. Gilbert posts annual revenues of roughly $80 million and represents companies such as Trex Medical and OEC Medical Systems. DI executives expect the transaction to be completed late this month.