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Apollo finds mobile MRI a good risk through SMT and Alliance acquisitions

Apollo finds mobile MRI a good risk through SMT and Alliance acquisitions

Imaging services investment confirms mobile's revival

Don't cry for mobile MRI. Despite sagging reimbursement levels, the U.S. shared imaging services business has steadily improved for those players that were able to tough it out past the industry's nadir in 1994 and continue investing in fleet upgrades. Remember when the operative words for providers of mobile magnetic resonance imaging services were "overleveraged and obsolete?" How times change.

That outside investors are showing interest in the mobile MRI business is a clear sign industry conditions have changed for the better. New York investment firm Apollo Management will purchase control of Alliance Imaging of Anaheim, CA, and SMT Health Services of Pittsburgh in transactions valued at $258 million and $100 million, respectively. The two shared imaging services firms will then be merged together.

Although Apollo extended its tender offer for SMT until Aug. 5, due to a refiling requirement related to its Alliance deal, the investor already has the required number of shares to complete the SMT purchase, according to Joshua Harris, an Apollo partner. The Alliance recapitalization transaction is expected to close in October, at which time Apollo will own 82% of the company through its affiliate, Newport Investment. Following the merger with SMT, existing shareholders of Alliance will own about 10% of the combined company.

"The name is staying the same," said Alliance CEO Richard Zehner. "We are not moving. We will be in the same business, doing the same job we have always done."

Management from both companies will be maintained, Harris confirmed. Apollo will help provide strategic direction.

"Typically, we partner with strong operating professionals, providing strategic guidance and access to capital but allowing them to run their businesses," he said.

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