Privately held Insight Imaging Inc. is set to end its run as an Orange County-based company with a sale that follows two bankruptcy reorganizations in the past five years, new ownership, and a recent deal that will fold it into a Minnesota firm.
Black Diamond Capital Management LLC—an $11 billion private equity firm that took a majority stake in Insight last year, after its second bankruptcy—said earlier this month that it would make an additional investment in the company. That laid the groundwork for Insight to buy Toronto-based Onex Corp.’s controlling interest in Center for Diagnostic Imaging Inc. in St. Louis Park, Minn.
Financial terms of Greenwich, Conn.-based Black Diamond’s investment in Insight and the deal for CDI were not disclosed.
Lake Forest-based Insight Imaging ranks No. 63 on the Business Journal’s annual list of largest private companies with estimated annual revenue of $181.9 million (see list, page 16; related stories throughout issue). It employs 104 workers here, and 1,385 companywide, according to the company.
The Insight-CDI deal is expected to be completed in July. The combined company will be based in Minnesota and run by Tom Tomlinson, CDI’s chief executive.
Kip Hallman, who has been Insight Imaging’s chief executive since 2008, is set to stay with the company until the deal closes. Hallman declined further comment.
CDI said in a release that the combined company’s management team “intends to maintain a presence at Insight’s California office for the foreseeable future” but offered no further details.
The combined company will have 116 fixed-site imaging centers in 25 states, including 56 from Insight Imaging and 60 from CDI. It also will have 90 mobile scanning units.
Other large medical imaging companies include Newport Beach-based Alliance HealthCare Services Inc., Los Angeles-based RadNet Inc. and Medical Resources Inc. of Bloomfield, N.J.
The acquisition is aligned with a broader consolidation trend in the U.S. diagnostic imaging center industry, said Nadim Dahar, a senior analyst with San Antonio-based market tracker Frost & Sullivan.
“It’s a direct reaction of these providers (dealing with) consecutive reimbursement cuts, six or seven of them total during the last four or five years,” he said.
Centers “have seen their profit margins under huge stress,” Dahar said.
Medical imaging companies have had to juggle lower payments from Medicare and Medicaid, as well as from private insurers. The historically high unemployment rates of recent years, reduced office visits, closer scrutiny from health insurers, and higher patient deductibles and copayments also have been among the factors pinching the industry.
The CDI-Insight deal comes some 15 months after Insight Imaging emerged from a second round of bankruptcy protection as a privately held company with new ownership.
Black Diamond became Insight’s new majority owner in that reorganization. Insight was a low-profile public company whose shares were lightly traded on the Pink Sheets exchange prior to the second bankruptcy.
Insight Imaging shed nearly $300 million of debt in its second bankruptcy. Hallman said at the time that the reorganization would leave Insight “essentially debt-free, which is a really nice place to be.”
Insight Imaging filed for its first bankruptcy in 2007 as it faced a debt crunch.
Reduced federal reimbursements and pressures from insurers for lower prices had begun to squeeze the company at the time, which had about $500 million in debt as it was facing a cash crimp.
The company completed its first reorganization by trading 90% of its common stock to bondholders, who in turn forgave $195 million worth of debt that was due in 2011.
