Newspaper article The Florida Times Union

Orthodontic Centers Buys Competitor Revenue Gain Would Be about 50 Percent

Newspaper article The Florida Times Union

Orthodontic Centers Buys Competitor Revenue Gain Would Be about 50 Percent

Article excerpt

Byline: Mark Basch, Times-Union business writer

Orthodontic Centers of America Inc. yesterday announced an agreement to buy a competitor, OrthAlliance Inc., for up to $55.7 million in stock in a deal that would increase Orthodontic Centers' revenue by about 50 percent.

Like Ponte Vedra Beach-based Orthodontic Centers, Torrance, Calif.-based OrthAlliance provides business management services for orthodontists across the country. So the merger appears to be a natural fit.

"OrthAlliance has the same type of doctors that OCA actively recruits," said Bart F. Palmisano Sr., president and chief executive officer of Orthodontic Centers, or OCA.

Although there are differences in the way the two companies do business, they are alike enough that when OrthAlliance was formed in 1997, its CEO at the time stated that his company was modeled somewhat after Orthodontic Centers. Orthodontic Centers was founded in 1985 and went public in 1994.

"We think this is an excellent opportunity both for our shareholders and our doctors," said OrthAlliance Chairman, interim President and CEO W. Dennis Summers, in a conference call with analysts.

Orthodontic Centers produced revenue of $77.5 million and earnings of $13.8 million in the first quarter this year, while OrthAlliance had revenue of $38.6 million and earnings of $1.8 million. Based on that, the merger could increase Orthodontic Centers' quarterly revenue by slightly more than 50 percent.

Orthodontic Centers has more than 400 orthodontists working at more than 600 offices in the United States, Japan, Mexico and Spain. OrthAlliance has 226 orthodontists and pediatric dentists working out of 395 U.S. offices.

OrthAlliance's network includes 25 pediatric dentists, who provide a good strategic fit because they refer patients to the orthodontists. Orthodontist Centers has not previously worked with dentists in its network.

"I think we're all a little excited about sticking our toe in the water with the pediatric dentists," Palmisano said in the conference call. "Who knows what it might lead to?"

Palmisano said some of OrthAlliance's doctors may choose to buy out of their contracts rather than move to Orthodontist Centers, so it's too soon to say how many will work for the combined company. …

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