Emis spends more than £10m on two acquisitions

Healthcare software developer Emis Group has made two acquisitions worth more than £10m in total to bolster the business.

Emis CEO Andy Thorburn

The Leeds-based group has bought the outstanding minority stake in its subsidiary Rx, which trades as Emis Health Community Pharmacy, for £8m, giving the group 100 per cent control of the business.

It has also spent an initial £2.5m on the acquisition of Dovetail Digital, a leading early stage UK technology business specialising in blockchain software for the healthcare market.

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In the first acquisition, Emis bought a 21.1 per cent minority stake in Rx from Phoenix Medical Supplies, the leading pharmaceutical wholesaler, which has held its stake since before Emis acquired 78.9 per cent of Rx in 2010.

Phoenix, which owns more than 500 pharmacies in the UK, is a significant user of Rx's systems and services, and is expected to remain an important customer of the group going forward.

The consideration for the purchase is £8.0​m in cash, which has been funded out of E​mis’ existing cash reserves. Prior to completion, Rx paid a dividend to its shareholders of £19.0​m from its accumulated reserves, of which £4.0​m was paid to Phoenix with the balance retained within the ​g​roup.

​Last year Rx contributed revenues of £21.9​m and a segmental operating profit of £5.6​m to the ​g​roup. The transaction is expected to be immediately earnings enhancing for Emis.

E​mis CEO Andy Thorburn said:​ ​“Rx has been an important contributor to E​mis​ Group since 2010 and Phoenix a valued partner, co-investor and customer throughout that period.

​"​We are pleased to have come to this agreement and to consolidate full control of Rx which, as the market-leading community pharmacy solution, remains central to the ​g​roup’s strategy of providing connected healthcare software and services across every major UK healthcare setting.”

​In the second deal, Emis will pay ​​an initial consideration of £2.5m​ for Dovetail.​

​Emis said t​he acquisition is in line with the ​g​roup’s strategy of identifying sustainable long-term market opportunities delivering connected healthcare systems.

Founded in July 2017, Dovetail Lab creates software that gives patients full control of their healthcare records, delivering secure exchange of data between different health services and new digital technologies involved in patient care.

​Emis said i​ts patent-pending blockchain-based technology delivers accountability, security and trust in the transmission of healthcare data, whilst mitigating risk and maximising health outcomes for patients.

Dovetail Lab expects to generate revenue of approximately £​900,000 and a small operating loss during its first full year of operation in 2018.

The team based in London will join E​mis as part of the acquisition, including Dovetail Lab’s CEO and co-founder Alexandra Eavis.

Existing Dovetail Lab shareholders (comprising management and early stage investors) will retain a 10​ per cent​ share of the original business subject to a call option in favour of E​mis exercisable between 2023 and 2025.

E​mis is acquiring an initial 90​ per cent​ shareholding in Dovetail Lab on a cash and debt free basis for £2.5m, to be satisfied by £1.5m in cash payable immediately and £1.0m in E​mis shares to be issued on successful product delivery milestones. Up to £2.5m of further consideration may be payable on the attainment of certain business plan targets in 2019, 2020 and 2021.

​Mr Thorburn said:​ ​"This is a very exciting acquisition for the ​g​roup, with Dovetail Lab widely regarded as one of the leading healthcare blockchain businesses in the UK, that is driving innovation across the sector.

"The business has already launched a successful pilot of its software within the NHS, giving patients access, visibility and control over their health data using explicit and informed consent to drive data sharing across all health and care settings. The potential applications for blockchain technology in the UK healthcare sector are significant and we look forward to working with the new team to explore these."