Avia Collinder, Business Reporter
Sagicor Investments Jamaica Limited and NCB Capital Markets have taken equity stakes in a start-up medical diagnostics company under a J$147 million financing deal structured by Sagicor Investments.
Under the financing arrangement - a mix of ordinary shares and convertible mezzanine financing — Sagicor and NCB Capital Markets initially held 43 per cent of Elite Diagnostic Limited, but now hold 37 per cent.
Their stakes have been diluted as new investors take up equity in the company.
Sagicor Investments CEO Donovan Perkins said the financing was arranged as a venture capital transaction, and that Elite would eventually be floated on the Jamaica Stock Exchange. Funds raised amounted to J$147.4 million, he said.
"Most financial institutions in the market compete aggressively and also cooperate together on financing projects which are attractive. This is just one of a number of capital-market transactions that have been successfully led by Sagicor with participation from competing institutions," Perkins told Wednesday Business.
Elite Diagnostic president CEO Wayne Chung — a partner of Excel Investments Inc, which owns majority shares in the new operation — says that the diagnostic centre, now three weeks in operation, will officially open its doors on Saturday, September 14 at 1B Holborn Road in Kingston.
The diagnostic imaging market, said Chung, is worth about J$2 billion, and could grow as prices for imaging services fall.
"As of 2011, the cost to health insurance companies for diagnostic services are approximately J$975 million. So assuming that insurance is half the market and cash the other half, the total is about J$1.95 billion," said Chung.
"One would assume that more than half of the population of Jamaica is not insured, so cash should be more," he said.
Elite hopes to gain market from the business now going to the overcrowded and under-equipped government-backed health facilities.
The company has poured US$3.2 million into its start-up, which includes the cost of brand new machines and working capital, Chung said. The start-up funds include the J$147m raised by Sagicor.
In May, Elite's 2.761 million shares were split 1,000 to Chung, 300,000 to Sagicor Investments, 900,000 NCB Capital and 1.56 million to Excel, according to Companies Office records.
Excel holds major share
On Friday, September 6, Chung said Excel now holds 51.37 per cent of the company; NCB Capital holds 29.61 per cent; Sagicor Investments has 9.87 per cent, a company called Barnett Limited in which Dr Christopher Tufton is a principal, holds 7.84 per cent; and Dr Lizette Mowatt owns 1.31 per cent.
Chung's partners in Excel include Richard Chin and Dr Neil Fung. Chin already owns three MRI facilities in South Florida.
Chung himself is a silent partner in Majesty Foods of Miami, formerly Patty King, he told Wednesday Business.
Elite has launched into business with magnetic resonance imaging or MRI, digital X-ray, ultrasound imaging, CT Scan and fluoroscopy machines. Other equipment is likely to be added over time as needed, Chung said.
The company employs 13 persons in addition to contracted radiographers.
Perkins said Elite was seen as an attractive proposition because of its potential to compete and to grow. He said the size of the equity with which the founders came to the table was another factor in their favour.
"The key things we looked at as it related to Elite were: experienced management; 'skin in the game' - the shareholders have invested significant equity; the opportunity in this specific segment of the industry; ability to compete in price and service while raising the bar; and quality of technology investment," said Perkins.
"They scored high in all of these quantitative and qualitative categories."
Sagicor's due diligence included a trip to Florida to tour a similar facility operated by one of the Elite shareholders.
Perkins also made note of the source of Elite's diagnostic equipment - General Electric - saying the machinery "is equal to the first-class diagnostic equipment that is available in US hospitals."
Chung said the prices for imaging services are already trending down, with some costs at half of what they were two years ago.
Competition, he adds, is likely to drive prices down even further.