Anaheim-based Alliance Imaging Inc. , a provider of magnetic resonance imaging systems , is hoping to resonate with investors.
Shares of Alliance, which provides mobile MRI services to hospitals, started trading Friday. The company offered 9.4 million shares of its common stock at $13, raising $122 million. After the offering, Alliance counted a market value of more than $600 million.
Alliance said it plans to use much of the proceeds to pay down debt. Alliance, which counted $345.3 million in sales last year, reported $769.2 million in debt as of June 13.
“We are a highly leveraged company and our liabilities exceed our assets by a substantial amount,” Alliance said in its filing.
The company incurred $466 million of its debt in its 1999 acquisition by Viewer Holdings LLC, which is owned by two investment funds sponsored by Kohlberg Kravis Roberts & Co. of New York.
But Alliance said in its filing that it believes it stands to benefit from its status as a large provider of contract MRI services.
Alliance pointed out that its reimbursement risks are lower because it generates 90% of its revenue by billing hospitals and clinics, not health insurance companies or other third-party payers.
Alliance also said that MRI services made up $6.7 billion of the $66 billion diagnostic imaging industry in 1999. MRI use has grown because it is considered a cost-effective, non-invasive diagnostic tool, according to Alliance.
“We believe MRI will continue to capture a larger portion of the diagnostic imaging market,” the company said. “The number of MRI scans grew at a compound annual rate of 10.5% from 1990 to 2000 and is projected to grow at approximately this rate through 2006.”
Alliance said it is looking to increase the number of scans it performs for existing clients, land new clients and pursue acquisitions.
“That’s been a hot area,medical imaging,especially on the outpatient side,” said Mitra Ramgopal, an analyst with Sidoti & Co. LLC, a New York-based investment bank. “MRI and CT scans are the most popular procedures.”
Alliance said it had 392 diagnostic imaging and therapeutic systems, including 325 MRI systems. The company counted 1,218 clients in 43 states as of March 31, according to its filing.
The company lost $2.2 million last year. Even so, Alliance could benefit from a renewed interest in healthcare companies on Wall Street. The company filed to go public earlier this year but pulled back in hopes of a better reception later.
“Healthcare companies going public stand a better chance,” Ramgopal said. “One thing with healthcare,it’s not as caught up in the economy, interest rates and what’s going on in Asia. Investors have done well in healthcare; there’s a favorable sentiment.”
Alliance’s competitors could include InSight Health Services Corp., a Newport Beach company that recently agreed to a buyout by J.W. Childs Associates LP and the Halifax Group LLC, two private investment firms. Other competitors are Radiologix Inc. of Dallas and Syncor International Corp. of Woodland Hills.
Alliance’s largest private shareholder is Viewer, which acquired approximately 92% of Alliance for around $196.7 million in 1999. Alliance said in its filing that Kohlberg Kravis Roberts owned approximately 78% of its common equity and would retain 65% of its common equity following the offering.
“KKR will be able to elect our entire board of directors, control our management and our policies and determine, without the consent of our other stockholders, the outcome of any corporate transaction or other matter submitted to our stockholders for approval,” Alliance said in its filing.
Alliance is no stranger to the public markets. The company did an IPO in 1987, but was taken private again a year later. A second offering came around in 1991, and Alliance’s stock traded publicly for about six years. Apollo Management, a private equity firm, took Alliance private again in 1997. KKR, through Viewer, later bought Alliance.
Alliance’s management team includes Richard Zehner, chairman and chief executive; Jamie Hopping, president and chief operating officer; Ken Ord, executive vice president and chief financial officer and Russell Phillips, general counsel and corporate secretary. The company has 1,960 employees, including 325 in OC. n
