Virtual Radiologic Corp. is becoming the undisputed king of teleradiology.
The newly private, Eden Prairie, Minn.-based company agreed to acquire top rival NightHawk Radiology Holdings Inc. (NSDQ:NHWK) for $170 million, or $6.50 a share.
The deal would give the combined company $278 million in annual revenues and access to 325 radiologists serving 2,700 healthcare facilities in all 50 states.
“Local radiology practices and hospitals are under intense pressure to deliver the highest quality care in the most efficient manner possible,” said CEO Rob Kill, who will remain CEO after the merger, said in prepared remarks. “The need for expanded access, improved quality and reduced costs is clear. Both vRad and NightHawk have been delivering these benefits in partnership with local radiologists for many years.
The merger reflects the tumultuous change that has swept the teleradiology industry over the past three or four years. When Virtual Radiologic débuted on Wall Street in 2007, that company and NightHawk dominated the rapidly expanding market of teleradiology: Helping hospitals and clinics remotely connect with radiologists across the U.S. to interpret imaging data.
But the weak economy slowed that growth, pressuring profit margins and stock prices at both companies. Virtual Radiologic shares, which hit the market three years ago at $18 a share, had fallen to $12 a share by the time private equity firm Providence Equity Partners acquired the company in July for $294 million.
NightHawk also struggled mightily. After years of rapid growth, the company lost $48.4 million on sales of $162.5 million in 2009, compared to a profit of $21.6 million on sales of $167.6 million the previous year. NightHawk stock, which hit a high of $25 a share in 2006, has traded below $5 since the beginning of the year.
Virtual Radiologic’s $6.50-per-share offer represents a 100 percent premium over Nighthawk’s Sept. 24 closing price of $3.25 a share. The companies expect to close the deal in first quarter of 2011.