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Anteo Diagnostics improves finances for post-acquisition operations

Anteo Diagnostics (ASX:ADO) has successfully negotiated a more flexible payment scheme in its landmark acquisition of Belgium-based specialty diagnostics company DIAsource ImmunoAssays.

The €15.4 million (A$23.1 million) acquisition first flagged in August originally contemplated a combination of cash and equity to be paid entirely upfront - but it will now entail a 50% upfront cash component (€7.7 million) with the balance to be settled via a deferred payment plan.

This improved plan follows Anteo's successful raising of more than A$13.2 million via a rights issue and placement.

Anteo intends to satisfy the upfront cash component of the DIAsource acquisition with the proceeds of this fundraiser.

The funding drive included an entitlement offer raising about $5.3 million, a $5.8 million shortfall placement and an additional placement generating about $1.2 million.

Before this outcome was achieved, it had been proposed to fund the majority cash component through a combination of debt (proposed convertible note facility) and equity, via a non-renounceable rights issue.

As a result of different terms put forward by the proposed convertible note provider, Anteo has ceased negotiations with that party in respect of a previously proposed €10 million convertible note.

As part of severance arrangements, Anteo will issue €100,000 ordinary fully paid shares to that party on the same terms as the Entitlement Offer, and the €1m break fee will not be payable.

Game-changing deal

The acquisition will transition Anteo towards becoming cash flow positive.

DIAsource generated revenue of €11.9 million (A$19.3 million) in 2014, and €7.2 million in the first half of 2015 (25% growth) with quarterly EBITDA margins of 20%.

The acquisition will also provide the company with an established global distribution platform, manufacturing capabilities and a significantly broadened product range.

The transaction also brings a world-class (ISO, US FDA and CE IVD certified) manufacturing facility to Anteo and our shareholders.

The new combined group will include 100 employees.

Mix&Go advantage

DIAsource's existing platform provides significant opportunities for Anteo's Mix&Go technology, delivering tailored customer offerings and accelerating sales of the Mix&Go product range.

Mix&Go represents Anteo's healthcare nanoglue family, which uses coordination chemistry (rather than covalent chemistry or passive binding) for gentle and secure multipoint binding of biomolecules to synthetic surfaces.

This technology employs fine-scale nanotechnology in bioseparations processes, which are critical in medical lab work.

The market for bioseparation systems is expected to value US$6 billion by 2018.

DIAsource is expected to harvest the inherent advantages of this technology in its lucrative industrial immunoassay manufacturing business.

Analysis

The improved terms for this deal enable the combined Anteo/DIAsource business to move forward on a strong development path.

Negotiation of these new terms also illustrates DIAsource's ongoing participation, alignment and commitment towards Anteo and its objectives.

It further adds potential value to Anteo by allowing the DIAsource vendors to take equity in Anteo on a fair and reasonable basis without causing an imbalance in control.

The new terms of the DIAsource acquisition also improve the deal's potential as a price catalyst for Anteo, enhancing the combined company's ability to pursue major valuation drivers such as revenue improvement, distribution expansion and economies of scale.

The acquisition of DIAsource is an important step in the staged global expansion strategy for Anteo and is expected to provide for expanded management expertise, knowledge, skillsets and access to unique technologies.

DIAsource is a sound investment with a strong balance sheet and growth in both revenue and earnings, as well as an established organisation with experienced diagnostics management and the means for exploiting a truly global distribution platform.

This is expected to support Anteo's Mix&Go platform, which is targeting a bioseparation systems market is expected to value US$6 billion by 2018.

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