Skin Care Health Group PhotoMedex to Acquire LCA-Vision for $106 Million

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HORSHAM, Pa. and CINCINNATI, Ohio— PhotoMedex, Inc. (NasdaqGS and TASE: PHMD) and LCA-Vision, Inc. (NasdaqGS: LCAV) late yesterday announced the signing of a definitive agreement where PhotoMedex will acquire LCA-Vision for $5.37 per share in cash, or approximately $106.4 million.

PhotoMedex is a global skin health company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians and consumers. LCA-Vision Inc. is a leading provider of laser vision correction services under the LasikPlus brand.

This proposed transaction is subject to customary closing conditions, including LCA-Vision shareholder approval and regulatory approvals, and is subject to a 30-day "go shop" period. The boards of directors of both PhotoMedex and LCA-Vision have voted unanimously in favor of the transaction, which is expected to close in the second quarter of 2014.

Following completion of the transaction, Dr. Dolev Rafaeli will continue to serve as CEO of PhotoMedex and Dennis McGrath will continue to serve as president and CFO. Michael Celebrezze, currently CEO of LCA-Vision, will serve as president and CEO of the LCA-Vision subsidiary, the announcement said.

As a result of the transaction, there will be no changes to the PhotoMedex board, but the company intends to create a six-person board of directors to oversee the LCA-Vision subsidiary.

PhotoMedex headquarters will continue to be in Horsham, Pennsylvania, while LCA-Vision's headquarters and its call center will remain in Cincinnati. As a result of this transaction there will be no changes to any of the PhotoMedex, Radiancy or LCA-Vision brands, including LasikPlus, the companies stated.

LCA-Vision Inc., provider of laser vision correction services under the LasikPlus brand, operates 62 LasikPlus vision centers in the U.S., including 52 full-service LasikPlus fixed-site laser vision correction centers and 10 pre- and post-operative LasikPlus satellite centers. LCA-Vision has performed more than 1.3 million procedures since FDA approval of photorefractive keratectomy (PRK) in late 1995.

"The combination of these synergistic businesses holds potential for powerful financial leverage and profitable long-term growth by providing a platform to establish company-owned XTRAC Psoriasis and Vitiligo Centers of Excellence and clinical dispensing of Neova products in LasikPlus facilities," said Dr. Rafael of PhotoMedex.

"We have a tremendous opportunity to leverage the LasikPlus infrastructure and customer-centric staff, which are the best in the industry yet presently underutilized. LCA-Vision is without rival when it comes to managing a consumer medical procedure from initial patient inquiry to call center operations, through to converting the consultation to a surgical appointment and procedure. Lasik procedures, however, are typically performed only one or two days a week in a costly infrastructure while the other days are devoted to patient screening, pre-operative and post-operative care. LasikPlus centers and staff, who deal one-on-one with patients, are ideally suited for expanding procedures beyond Lasik to include XTRAC laser treatments for various dermatologic disorders such as psoriasis and vitiligo, as well as utilizing the patient interaction for additional clinical brand dispensing."

"At PhotoMedex we have a proven ability to generate dermatology patient traffic, and now we will have the national footprint to scale-up those efforts in an immediate and meaningful way while bringing recurring reimbursed patient revenue and economies of scale to LasikPlus centers. We expect this to be transformational to our XTRAC business," he added. "On average, psoriasis patients are treated with XTRAC twice per week for three to six weeks, twice a year and over the course of many years. In contrast, the current LCA-Vision model has virtually no repeat business and is mostly a private-pay procedure. We believe that with minor modification to the layout of the LasikPlus clinics, the professional and technical Lasik staffs will be able to offer dermatology patients the same high level of care and customer service with only modest staffing increases and incremental training."

Upon completion of this transaction, LCA-Vision will operate as a wholly owned subsidiary of PhotoMedex. There are no layoffs planned at LCA-Vision, and all 62 LasikPlus vision centers in the U.S., including 52 full-service LasikPlus fixed-site laser vision correction centers and 10 pre- and post-operative LasikPlus satellite centers, are expected to remain intact. PhotoMedex plans to build on the current LCA-Vision strategic expansion of service offering to bolster cataract and intraocular lens procedures, and to expand the optometrist referral network, all of which are currently underway. The addition of XTRAC and Neova offerings to each center will improve center-level economics and will allow PhotoMedex to strategically evaluate expansion of the clinic network.

LCA-Vision’s CEO, Celebrezze said, "For several years, it has been a priority for LCA-Vision to pursue diversification of our revenue stream while at the same time becoming less reliant on a procedure that is closely tied to consumer confidence and macroeconomic factors. This business combination with PhotoMedex represents a compelling, immediate solution to leverage our established system by offering fully reimbursed, laser-based medical procedures. The people of PhotoMedex are expert marketers for consumer health, wellness and beauty products with a proven ability to run efficient operations while supporting innovation. Combining our two companies provides for an exciting future for my LCA-Vision colleagues, while offering a compelling premium to LCA-Vision stockholders with the certainty of all-cash terms."

LCA-Vision's operations are expected to be accretive to PhotoMedex's cash EPS in 2014, excluding one-time, transaction-related items.