Wellspring buys PE-backed Center for Diagnostic Imaging

  • Deal initially disclosed in HSR filing
  • Sell-side adviser: Jefferies
  • CDI’s smaller Atlanta peer said to weigh sale in ’18

Wellspring Capital Management prevailed in the sponsor-driven process for Center for Diagnostic Imaging, the country’s largest private diagnostic-imaging company, Buyouts has learned.

The seller is Greenwich, Connecticut, Black Diamond Capital Management. The alternative-asset manager retained Jefferies to advise on a sales process in 2018, as initially reported by Buyouts.

The transaction, initially disclosed in an premerger filing on the FTC website, commanded a high-single-digit multiple of Ebitda, a person familiar with the matter said.

That implies a valuation south of $750 million, based upon the about $75 million in adjusted 2018 Ebitda that CDI was expected to produce, as reported.

The process for CDI, having kicked off last July, narrowed to New York’s Wellspring and two other parties in its late stages, the person said.

CDI hit the market around the same time as a smaller peer, American Health Imaging, this person and another source said.

Atlanta’s AHI last year retained SunTrust for financial advice, one of the people said. This source and a third placed AHI’s Ebitda around $20 million.

While it’s unclear whether the process for AHI is ongoing, Wellspring might ultimately consider buying the smaller company through CDI, one of the people suggested.

Operating within a segment of the healthcare universe that has yet to consolidate, CDI, given its scale and history of tuck-in M&A, was viewed by some as an opportunity to become an industry consolidator, Buyouts previously reported.

With a network of outpatient-based diagnostic-imaging centers spanning more than 40 states, CDI is the largest U.S. provider behind publicly traded RadNet, whose current market cap is around $700 million.

In addition to the medical-imaging centers CDI operates, it has a physician-management business arm, through which it partners with doctors and health systems through various structures to consult on related reorganization needs.

The company also offers mobile diagnostic imaging solutions for MRI, PET and CT scans to hospitals, clinics and other healthcare organizations.

Black Diamond initially purchased CDI in August 2012 from Toronto’s Onex Corp. Black Diamond concurrently merged CDI with existing portfolio company Insight Imaging, with the former’s management team staying on to lead the combined entity.

Representatives of Wellspring, CDI, AHI, and Jefferies didn’t immediately return requests for comment. SunTrust declined to comment.

Action Item: Reach out to Wellspring at +1 212-318-9800.

Update: This story was updated with a decline to comment from SunTrust.