Integral Diagnostics Limited (ASX:IDX) (Integral) is pleased to announce that it has entered into a merger process deed (Merger Process Deed) in relation to a potential merger with Capitol Health Limited (ASX:CAJ) (Capitol) by way of scheme of arrangement (Proposed Merger).

Under the Proposed Merger, Capitol shareholders would receive 0.12849 Integral shares per Capitol share (Merger Ratio). Following the Proposed Merger, Integral shareholders would own c. 63%, and Capitol shareholders would own c. 37% of the combined group.

Under the Merger Process Deed, Integral and Capitol have agreed to work together in good faith to complete confirmatory due diligence and finalise and enter into a binding agreement to implement the Proposed Merger (Implementation Deed) during a 4-week period of mutual exclusivity. The Implementation Deed is expected to be subject to customary conditions and regulatory approvals for a transaction of this kind, including Capitol shareholder approval. Capitol’s Board have confirmed that, subject to completion of confirmatory due diligence and entry into the Implementation Deed, each director intends to recommend to Capitol Shareholders to vote in favour of the Proposed Merger.

The announcement of the Merger Process Deed follows the provision of a non-binding indicative proposal by Integral to Capitol regarding the Proposed Merger and a subsequent period of collaborative engagement and value-confirming due diligence conducted between Integral and Capitol.

Dr Ian Kadish, MD and CEO of Integral said: “We are pleased to have reached this milestone in respect of the Proposed Merger of Australia’s only listed pure-play diagnostic imaging practices. The merger would create a scalable platform that would unlock significant value for stakeholders of both Integral and Capitol, including patients, doctors and shareholders. The potential combination of the two businesses is compelling and logical and would see us create a leading player in Australian and New Zealand diagnostic imaging, with the scope and scale to transform the industry. Integral has benefitted significantly from acquisitions over time and the Proposed Merger is one that would be transformative, driving a step-change in Integral’s scale, capabilities and clinical outcomes.”

“We believe now is the right time to come together and we look forward to working closely with the Capitol team to agree and consummate this transaction that will better position both our businesses for the exciting future ahead.”

Whilst substantial mutual value-confirming due diligence has been conducted to date, Integral notes that there is no certainty that the Proposed Merger will proceed or that the Merger Process Deed will result in a binding offer by Integral for Capitol.

Read the full media release here.