AdaptHealth Corp. Announces Acquisition of National HME Provider AeroCare Holdings Inc. and Updates Financial Guidance For 2021
- Expected to significantly enhance scale and geographic reach, providing access to new customers and strengthening relationships with referral partners, patients, manufacturers, and managed healthcare plans
- Greater managed care access, broader product availability, and enhanced customer service for patients
- Combination of two industry leading technology platforms will position the combined company to lead the shift to connected healthcare and value-based arrangements
- Total purchase price of approximately $2.0 billion, comprised of $1.1 billion in cash and 31 million shares of AdaptHealth
- Expected to be financially accretive to growth, earnings, and cash flow
- $50 million in estimated run-rate cost synergies identified
- Best-in-class senior leadership team with strong cultural alignment
Under the terms of the deal, AdaptHealth (NASDAQ: AHCO) of Plymouth Meeting will make a $1.1 billion cash payment to AeroCare Holdings of Orlando. AeroCare will also receive 31 million shares of AdaptHealth common stock. The shares are valued at $972.8 million based on Monday’s closing price of $29.93. AdaptHealth’s stock opened up 13% at $33.80 per share on Tuesday.
“This transaction pairs up two industry leaders with similar strategies and strong execution track records,” Luke McGee, CEO of AdaptHealth, said in a statement. “Our combined company will further enhance our geographic reach with a footprint in 47 of the 48 continental U.S. states, strengthening relationships with our referral partners, patients, manufacturers, and managed health care plans. ”
In a conference call with analysts Tuesday morning, McGee said he has known AeroCare’s management team for seven years and the two companies have had “off-and-on” discussions about combining their businesses for several years but the timing wasn’t right until now.
AdaptHealth services about 1.8 million patients annually through its network of 269 locations in 41 states. The 3,700-employee company generated revenue of $529.6 million and recorded a net loss of $12.9 million last year. AdaptHealth became publicly traded company in July 2019 after merging with DFB Healthcare Acquisitions Corp., a special purpose acquisition company that was already publicly traded and sponsored by Deerfield Management Inc. of New York.
Founded in 2000, AeroCare is a national distributor of technology-enabled respiratory and home medical equipment. The company services patients in more than 300 locations across 30 states. AeroCare is currently owned by private investors including Peloton Equity, SkyKnight Capital, SV Health Investors, and AeroCare management and employees.
The combined company will operate under the name AdaptHealth. Luke McGee, CEO of AdaptHealth, and Steve Griggs, CEO of AeroCare, will jointly lead the company as co-CEOs. “I have every confidence Steve and I will work well together and divide responsibilities,” McGee said. Griggs said AdaptHealth’s acquisition “strengthens our combined ability to transform our industry and positively impact the lives of chronically ill patients across the country.” AdaptHealth intends to fund the cash portion of the deal through incremental debt, and has committed debt financing from Jefferies Finance LLC.
The acquisition and financing transactions have received necessary board approvals. The deal is expected to close in the first quarter of 2021, subject to certain regulatory approvals.
The M&A market for healthcare companies continues to strengthen in 2020 and as we approach 2021. There is unprecedented capital in market, the lowest interest rates in US history and strong acquirer motivations for high quality healthcare companies. Across the continuum of care, buyers and investors are looking for well established, profitable businesses and offering strong valuations and options for management.
Do you know the current market value of your business? We do! We are here to help you plan, prepare, explore and succeed in executing your strategic options.
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