In what could prove to be the micro-cap move of the summer, Union Dental Holdings Inc. (OTCBB: UDHI) has its sights set on a major acquisition - one that will essentially transition UDHI from a $2 million per year middleman, into a profitable, $12- $15 Million, dental powerhouse with virtually unlimited growth potential.

This Deal is a Steal!
UDHI announced today that it has signed a Letter of Intent to acquire Bellflower Dental (BD) in Bellflower, California for $5.0 Million. Bellflower, which had revenues of $10.2 Mil in '06 with an adjusted EBITDA of $521K, is not your average dental facility - not in the least bit! Moreover, research shows that a typical buyout price for a dental facility is approximately between 65%-75% of revenues - making this a very attractive pick-up.

Besides profitability, a nearly 357% immediate revenue increase, and a shot at a senior exchange listing (AMEX anyone?), Bellflower brings with it a number of invaluable Telecom and Teamster union relationships. These inroads are expected to provide a solid complement to UDHI's exclusivity agreements currently in place with both the CWA local 9400 in Paramount and 9586 in Norwalk, which cumulatively insure more than 50,000.

Bellflower's 16,250 square foot facility houses 60 dental chairs and focuses on every aspect of dentistry from the production of dental prosthetics to orthodontic surgery. The firm is strategically located about 20 minutes from Los Angeles, making it easily accessible to the thousands of union workers and their families in the area.

The facility is more or less your current dentist office on steroids. Boasting babysitting services, a movie theater, in-house massages while patients wait, and video games for children, Bellflower patients may be some of the only people out there actually looking forward to their next cleaning!

The New Leader in Crowns and Dental Prosthetics?

Although CEO, Dr. Green has taken on more of an administrative role as of late, he has deep roots in the U.S. dental community and possesses decades of experience in conducting specific procedures and developing prosthetics. Going forward, it's highly likely we'll see Doc focusing on his bread and butter - very promising for near-term growth.

With research indicating that costs associated with Porcelin-fused-to-metal dental crowns (non-precious metal) range between $600 and $910 - UDHI sure has a leg up on the competition. News dated 3/27/07 notes the company's proven ability to provide cost savings of between 20% - 30% by manufacturing dental prosthetics including crowns and bridges in- house. UDHI now has the capability to do this on a much larger scale than ever before. Look out!

For a union worker with $1,500 in annual allowable dental expenditures - the typical allotment - a 30% discount on crowns - is huge. This may not seem big to some, but if I'm a flight attendant that needs a wisdom tooth out yesterday and have to wait until next year because my annual limit has been reached, the choice to switch over to UDHI and receive 30% more care than before is a no-brainer.

Add in the fact that the facility is open nights and can keep tabs on little Jimmy while they pump you full of Nitrous Oxide and remove that pesky tooth - and the choice is pretty much made for you.

The Future - It's Bright!

UDHI is very confident in its ability to significantly boost revenues for the Bellflower facility over the near to mid-term. Commenting on this, Dr. Green stated: "Our contracts with CWA local labor unions in the area should add some significant revenue to the already existing income of the Bellflower practice. Through our marketing department we will offer some coupons for these CWA union members to try the Bellflower location for the first time."

$2,000,000 to $50,000,000?

By our accounts, if UDHI can attract approximately 4,000 new customers each year for Bellflower (if acquired) - which would account for only a minimal percentage of the CWA, Telecom, and Teamster union members in the area - the facility could be generating as much as $50 million per year, by year five of operations under the UDHI umbrella: (4,000 new customers per yr. X $2,500 (est. avg. dental/orthodontic allotment provided by labor unions minus $500) X number of years)This does not take even take into account growth to be experienced through the advancement of operations outside of this facility.

If an earth-shattering acquisition that changes the face of an already high-potential company for the better, helps achieve profitability and provides instant revenue growth exceeding 350% doesn't excite you - we don't know what will. Do yourself a favor and weigh your options carefully here folks. Waiting until Friday could prove to be equally as painful as a root canal gone wrong.

Check our reports section for past coverage on UDHI and the latest report on Tootie Pie Company Inc.

Labels: OTCBB: UDHI, UDHI, UDHI.ob, Union Dental Holdings, Union Dental Holdings Inc.