Virtual Radiologic Opens up in IPO
by Carolyn Murphy

The Deal Magazine

November 15, 2007 - Generation Partners portfolio company Virtual Radiologic Corp. on Wednesday, Nov. 14, priced shares in its initial public offering at the midpoint of its range, raising $68 million. The Minnetonka, Minn., teleradiology company sold 4 million shares at $17apice, the midpoint of its projected $16 to $18 range and has offered its underwriters an over allotment option to purchase 600,000 shares, according to a filing with the Securities and Exchange Commission.

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

Virtual Radiologic shares opened on the NASDAQ Thursday morning at $19 apiece, rose to as much as $20 apiece before retreating to hover near their open price late morning.

Before the offering, Greenwich, Conn.-based Generation Partners had 33.3% of the company, owning more than 4.1 million shares, a stake that dilutes to 25.2% with the IPO, according to the filing.

Most recently, Generation bought 1.33 million shares in the company for $12 apiece in April, a deal valued at $16 million.

Based on the open price, the venture firm’s stake is now worth $78.5 million, while the value of that April stake climbs to nearly $25.3 million. Generation Partners is not selling shares in the offering.
The company said Thursday it expects proceeds before expenses of $63.24 million. Virtual Radiology said it intends to use proceeds from the offering to repay debt and expand its offerings, and for recruitment, marketing and working capital.

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

The company provides teleradiology services, or diagnostic reads on electronically transmitted images, for radiology practices, hospital, clinics and diagnostic imaging centers.

Citing research firm Frost & Sullivan, Virtual Radiologic said the volume of digital diagnostic image is expected to rise 15% annually to more than 500 million procedures by 2009.

The float comes at a rocky time for some IPO’s.

Four companies in the last several days have pulled plans to go public including most recently Cross Match Technologies Inc., which makes fingerprint scanning devices. It scrapped its IPO on Tuesday.

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