Acquisitive EMIS completes takeover of subsidiary firm and swoops for early stage tech business

Healthtech and software business EMIS Group has completed the purchase of an outstanding minority stake in a subsidiary firm for £8m and has also swooped for a technology business for £2.5m. 

The Leeds-headquartered firm has acquired the outstanding minority stake in its subsidiary Rx, which trades as EMIS Health Community Pharmacy, giving the Group 100% control of the business. It has also acquired Dovetail Digital, a leading early stage UK technology business specialising in blockchain software for the healthcare market, for £2.5m.

The 21.1% minority stake was acquired from Phoenix Medical Supplies, the leading pharmaceutical wholesaler, which has held its stake since before EMIS Group acquired 78.9% of Rx in 2010. Phoenix, which owns more than 500 pharmacies in the UK, is a significant user of Rx’s systems and services, and is expected to remain an important customer of the Group going forward.

The consideration for the purchase is £8m in cash, which has been funded out of EMIS Group’s existing cash reserves. Prior to completion, Rx paid a dividend to its shareholders of £19m from its accumulated reserves, of which £4m was paid to Phoenix with the balance retained within the Group.

For the year ended 31 December 2017, Rx contributed revenues of £21.9m and a segmental operating profit of £5.6m to the EMIS Group.  

EMIS Group CEO Andy Thorburn said: “Rx has been an important contributor to EMIS Group since 2010 and Phoenix a valued partner, co-investor and customer throughout that period. We are pleased to have come to this agreement and to consolidate full control of Rx which, as the market-leading community pharmacy solution, remains central to the Group’s strategy of providing connected healthcare software and services across every major UK healthcare setting.”  

EMIS said its acquisition of Dovetail was in line with the Group’s strategy of identifying sustainable long-term market opportunities delivering connected healthcare systems.

 Founded in July 2017, Dovetail Lab creates software that gives patients full control of their healthcare records, delivering secure exchange of data between different health services and new digital technologies involved in patient care. Its patent-pending blockchain-based technology delivers accountability, security and trust in the transmission of healthcare data, whilst mitigating risk and maximising health outcomes for patients. .

 Dovetail Lab expects to generate revenue of approximately £900,000 and a small operating loss during its first full year of operation in 2018. The team based in London will join EMIS Group as part of the acquisition, including Dovetail Lab’s CEO and co-founder Alexandra Eavis. Existing Dovetail Lab shareholders, comprising management and early stage investors, will retain a 10% share of the original business subject to a call option in favour of EMIS Group exercisable between 2023 and 2025.

EMIS Group is acquiring an initial 90% shareholding in Dovetail Lab on a cash and debt free basis for £2.5m, to be satisfied by £1.5m in cash payable immediately and £1m in EMIS Group shares to be issued on successful product delivery milestones. Up to £2.5m of further consideration may be payable on the attainment of certain business plan targets in 2019, 2020 and 2021.

Andy Thorburn, CEO of EMIS Group, said: “This is a very exciting acquisition for the Group, with Dovetail Lab widely regarded as one of the leading healthcare blockchain businesses in the UK, that is driving innovation across the sector.

“The business has already launched a successful pilot of its software within the NHS, giving patients access, visibility and control over their health data using explicit and informed consent to drive data sharing across all health and care settings. The potential applications for blockchain technology in the UK healthcare sector are significant and we look forward to working with the new team to explore these.”

Schofield Sweeney LLP acted on behalf of EMIS in respect of the acquisition of Dovetail Digital Limited (Martin Sweeney and Jessica Fielden) and the acquisition of the outstanding minority stake in RX Systems Limited (Steven Millward and Lucy Holroyd).