Virtual Radiologic Sets Range
by Carolyn Murphy

The Deal Magazine

October 2, 2007 –  Generation Partners portfolio company Virtual Radiologic Corp. set a range for its public offering Friday, with hopes of raising about $72 million.

The Minnetonka, Minn. – based teleradiology company plans to sell 4.6 million shares between $16 and $18 per share, including an over allotment option for underwriters to purchase 600,000 shares, according to a filing Friday with the Securities and Exchange Commission. If it prices at the midpoint of the range, Virtual Radiologic said it foresees net proceeds of $61.7 million.

Goldman Sachs & Co., Merrill Lynch & Co. and William Blair & Co. are underwriting the offering.

Greenwich, Conn.-based Generation Partners now has a 33.3% interest in the company, owning 4.1 million shares, a stake that will dilute to 25.2% after the IPO. Most recently, Generation bought 1.33 million shares in the company for $12 apiece in April, a deal worth $16 million. The venture capital firm is not selling shares in the offering.

Virtual Radiologic provides teleradiology services, or diagnostic reads on images transmitted electronically, for radiology practices, hospitals and clinics, as well as diagnostic imaging centers, around the clock. Citing research firm Frost & Sullivan, Virtual Radiologic said the volume of digital diagnostic image procedures should grow 15% annually to more than 500 million procedures by 2009.

The company said it earned $2.2 million on revenue of 63.3 million in the first three months of 2007 compared to a net loss of $1.8 million of $37.9 million in revenue for the same period a year earlier.

Virtual Radiology said it intends to use proceeds from the offering to repay debt, expand its offerings, recruitment and working capital.

Among risk factors, Virtual Radiologic cited in its filing the possibility of incurring losses as it has in the past, competition from NightHawk Radiology Holdings Inc., which it cites as its principal and only publicly held competitor, as well as being dependent upon its affiliated medical practices, which it does not own, and any changes in Medicaid or Medicare laws.

Willkie Farr & Gallagher LLP’s Daniel Rubino is the company’s counsel, while Richard Sandler of David Polk & Wardwell is underwriters’ counsel.

The company plans to list on the Nasdaq under the symbol VRAD.