- 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
AdaptHealth Corp. (NASDAQ: AHCO) (“AdaptHealth” or the
“Company”), a leading provider of home healthcare equipment,
medical supplies to the home and related services in the United
States, announced today that it has entered into a definitive
agreement to acquire Orlando, Florida based AeroCare Holdings, Inc.
(“AeroCare”).
Founded in 2000, AeroCare is a leading national
technology-enabled respiratory and home medical equipment (“HME”)
distribution platform in the United States and offers a
comprehensive suite of direct-to-patient equipment and services
including CPAP and BiPAP machines, oxygen concentrators, home
ventilators, and other durable medical equipment products. AeroCare
maintains extensive relationships with leading national
manufacturers and managed healthcare plans, and services patients
in over 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, and Luke
McGee, CEO of AdaptHealth, and Steve Griggs, CEO of AeroCare, will
jointly lead the company as Co-CEOs. Josh Parnes will continue to
serve as President. In addition, AdaptHealth will expand its Board
of Directors at closing of the transaction to 11 directors, with
Steve Griggs and shareholder designee Ted Lundberg of Peloton
Equity to join the Board.
Luke McGee commented, “We are very excited to welcome Steve and
the AeroCare team to AdaptHealth. This highly accretive transaction
pairs up two industry leaders with similar strategies and strong
execution track records of growth and profitability, technology
innovation, and patient service. Our combined company will further
enhance our geographic reach with a footprint in 47 of the 48
continental US states, strengthening relationships with our
referral partners, patients, manufacturers, and managed healthcare
plans. Steve is a highly-regarded innovator in our industry and
will bring exceptional leadership to AdaptHealth.”
Steve Griggs added, “Joining forces with AdaptHealth strengthens
our combined ability to transform our industry and positively
impact the lives of chronically ill patients across the country. I
am very excited to partner with Luke, Josh and the AdaptHealth team
to build an even stronger business, sharing best practices across
each organization to drive operational efficiencies and create
enhanced opportunities for our employees, patients, referral
sources and other stakeholders.”
The transaction values AeroCare at approximately $2.0 billion on
a debt-free, cash-free basis, with cash consideration of $1.1
billion, subject to adjustment as provided in the definitive
agreement, and 31 million shares of AdaptHealth common stock. The
share consideration will initially be a combination of Class A
Common Stock (up to 19.9% of the outstanding Class A Common Stock)
and non-voting convertible preferred, which converts to Class A
Common Stock once AdaptHealth shareholders approve the issuance of
the share consideration under NASDAQ rules. AdaptHealth will seek
such shareholder approval after closing of the transaction.
AdaptHealth intends to fund the cash portion of the consideration
and associated costs through incremental debt and has committed
debt financing from Jefferies Finance LLC.
The acquisition and financing transactions have received
necessary board approvals and are expected to close in the first
quarter of 2021, subject to certain customary closing conditions
and regulatory approvals, including expiration or termination of
all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. In connection with
the closing of the acquisition of AeroCare, the Company will also
simplify its corporate tax structure and convert all of the
outstanding membership units of its subsidiary limited liability
company, AdaptHealth Holdings LLC, and all of the outstanding
shares of Class B Common Stock into shares of the Company’s Class A
Common Stock. The simplification transaction will reduce the
Company’s tax compliance costs, enhance its ability to structure
future acquisitions and result in the Class A Common Stock being
the Company’s only class of Common Stock outstanding. In order to
provide for the payment of capital gains tax obligations related to
the conversion of management’s membership units and Class B Common
Stock, the Company has elected to satisfy with cash, in lieu of
certain shares of Class A Common Stock, a portion of the membership
units and shares of Class B Common Stock exchanged by certain
members of the Company’s management prior to the simplification
transaction.
Jefferies LLC is acting as the lead M&A advisor to
AdaptHealth and Truist Securities, Inc. is acting as financial
advisor to AdaptHealth. Willkie Farr & Gallagher LLP and
K&L Gates LLP are acting as legal advisors to AdaptHealth.
Morgan Stanley & Co. LLC is serving as AeroCare’s financial
advisor and Goodwin Procter LLP and Brown & Fortunato, P.C. are
serving as AeroCare’s legal counsel in connection with the
transaction.
Separately, AdaptHealth is pleased to announce it has closed its
acquisition of Massachusetts-based New England Home Medical
Equipment (“NEHME”), furthering the growth and expansion of its
diabetes division. Founded in 2015, NEHME is a leading supplier of
CGM and diabetes management supplies throughout New England and the
Northeastern United States. For the trailing twelve months ended
September 30, 2020, NEHME generated net revenues of approximately
$31 million.
Reaffirms 2020 Guidance and Increases
2021 Guidance
In connection with the acquisitions of AeroCare and New England
Home Medical Equipment, the Company is increasing financial
guidance for fiscal year 2021 for net revenue from a range of $1.30
billion to $1.40 billion to a range of $2.05 billion to $2.20
billion, Adjusted EBITDA from a range of $260 million to $280
million to a range of $480 million to $515 million, and Adjusted
EBITDA less Patient Equipment Capex from a range of $180 million to
$200 million to a range of $300 million to $330 million. This
guidance assumes the AeroCare transaction closes on January 31,
2021 and includes estimated financial results of the combined
company beginning on February 1, 2021. AdaptHealth reaffirms its
previously disclosed full year 2020 guidance.
Conference Call and
Webcast
The Company will host an investor conference call at 8:30 am
Eastern Time today, December 1, 2020, to discuss the details of
this announcement. The conference call may be accessed by dialing
(877) 423-9820 (Domestic) or (201) 493-6749 (International).
For reference during the call, the Company will post certain
supplemental slides at http://www.adapthealth.com.
The live call and replay will also be available on the Company’s
website, http://www.adapthealth.com, under “Investor
Relations”.
About AdaptHealth Corp.
AdaptHealth is a leading provider of home healthcare equipment,
medical supplies to the home and related services in the United
States. AdaptHealth provides a full suite of medical products and
solutions designed to help patients manage chronic conditions in
the home, adapt to life and thrive. Product and services offerings
include (i) sleep therapy equipment, supplies and related services
(including CPAP and bi PAP services) to individuals suffering from
obstructive sleep apnea, (ii) medical devices and supplies to
patients for the treatment of diabetes (including continuous
glucose monitors and insulin pumps), (iii) home medical equipment
(HME) to patients discharged from acute care and other facilities,
(iv) oxygen and related chronic therapy services in the home, and
(v) other HME medical devices and supplies on behalf of chronically
ill patients with wound care, urological, incontinence, ostomy and
nutritional supply needs. The Company is proud to partner with an
extensive and highly diversified network of referral sources,
including acute care hospitals, sleep labs, pulmonologists, skilled
nursing facilities, and clinics. AdaptHealth services beneficiaries
of Medicare, Medicaid and commercial insurance payors. AdaptHealth
services approximately 1.8 million patients annually in all 50
states through its network of 269 locations in 41 states. Learn
more at www.adapthealth.com.
Forward-Looking
Statements
This press release includes certain statements that are not
historical facts but are forward-looking statements for purposes of
the safe harbor provisions under the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements generally are accompanied by words such as “believe,”
“may,” “will,” “estimate,” “continue,” “anticipate,” “intend,”
“expect,” “should,” “would,” “plan,” “predict,” “potential,”
“seem,” “seek,” “future,” “outlook,” and similar expressions that
predict or indicate future events or trends or that are not
statements of historical matters. These forward-looking statements
include, but are not limited to, statements regarding projections,
estimates and forecasts of revenue and other financial and
performance metrics and projections of market opportunity and
expectations and the Company’s acquisition pipeline. These
statements are based on various assumptions and on the current
expectations of AdaptHealth management and are not predictions of
actual performance. These forward-looking statements are provided
for illustrative purposes only and are not intended to serve as,
and must not be relied on, by any investor as, a guarantee, an
assurance, a prediction or a definitive statement of fact or
probability. Actual events and circumstances are difficult or
impossible to predict and will differ from assumptions. Many actual
events and circumstances are beyond the control of the Company.
These forward-looking statements are subject to a number of
risks and uncertainties, including the outcome of judicial and
administrative proceedings to which the Company may become a party
or governmental investigations to which the Company may become
subject that could interrupt or limit the Company’s operations,
result in adverse judgments, settlements or fines and create
negative publicity; changes in the Company’s clients’ preferences,
prospects and the competitive conditions prevailing in the
healthcare sector; and the impact of the recent coronavirus
(COVID-19) pandemic and the Company’s response to it. A further
description of such risks and uncertainties can be found in the
Company’s filings with the Securities and Exchange Commission. If
the risks materialize or assumptions prove incorrect, actual
results could differ materially from the results implied by these
forward-looking statements. There may be additional risks that the
Company presently knows or that the Company currently believes are
immaterial that could also cause actual results to differ from
those contained in the forward-looking statements. In addition,
forward-looking statements reflect the Company’s expectations,
plans or forecasts of future events and views as of the date of
this press release. The Company anticipates that subsequent events
and developments will cause the Company’s assessments to change.
However, while the Company may elect to update these
forward-looking statements at some point in the future, the Company
specifically disclaims any obligation to do so. These
forward-looking statements should not be relied upon as
representing the Company’s assessments as of any date subsequent to
the date of this press release. Accordingly, undue reliance should
not be placed upon the forward-looking statements.
Use of Non-GAAP Financial Information
and Financial Guidance
This release contains non-GAAP financial guidance, which is
adjusted to exclude certain costs, expenses, gains and losses and
other specified items that are evaluated on an individual basis.
These non-GAAP items are adjusted after considering their
quantitative and qualitative aspects and typically have one or more
of the following characteristics, such as being highly variable,
difficult to project, unusual in nature, significant to the results
of a particular period or not indicative of future operating
results. Similar charges or gains were recognized in prior periods
and will likely reoccur in future periods.
The Company uses EBITDA, Adjusted EBITDA and Adjusted EBITDA
less Patient Equipment Capex, which are financial measures that are
not prepared in accordance with generally accepted accounting
principles in the United States, or U.S. GAAP, to analyze its
financial results and believes that they are useful to investors,
as a supplement to U.S. GAAP measures. In addition, the Company’s
ability to incur additional indebtedness and make investments under
its existing credit agreement is governed, in part, by its ability
to satisfy tests based on a variation of Adjusted EBITDA less
Patient Equipment Capex.
The Company believes Adjusted EBITDA less Patient Equipment
Capex is useful to investors in evaluating the Company’s financial
performance. The Company’s business requires significant investment
in equipment purchases to maintain its patient equipment inventory.
Some equipment title transfers to patients’ ownership after a
prescribed number of fixed monthly payments. Equipment that does
not transfer wears out or oftentimes is not recovered after a
patient’s use of the equipment terminates. The Company uses this
metric as the profitability measure in its incentive compensation
plans that have a profitability component and to evaluate
acquisition opportunities, where it is most often used for purposes
of contingent consideration arrangements. In addition, the
Company’s debt agreements contain covenants that use a variation of
Adjusted EBITDA less Patient Equipment Capex for purposes of
determining debt covenant compliance. For purposes of this metric,
patient equipment capital expenditure is measured as the value of
the patient equipment received during the accounting period without
regard to whether the equipment is purchased or financed through
lease transactions.
EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient
Equipment Capex should not be considered as measures of financial
performance under U.S. GAAP, and the items excluded from EBITDA,
Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex
are significant components in understanding and assessing financial
performance. Accordingly, these key business metrics have
limitations as an analytical tool. They should not be considered as
an alternative to net income or any other performance measures
derived in accordance with U.S. GAAP or as an alternative to cash
flows from operating activities as a measure of the Company’s
liquidity.
There is no reliable or reasonably estimable comparable GAAP
measure for the Company’s non-GAAP financial guidance because the
Company is not able to reliably predict the impact of certain
items, including equity-based compensation expense, transaction
costs and other non-recurring (income) expense for the full year
2021. As a result, reconciliation of these non-GAAP measures to the
most directly comparable GAAP measure is not available without
unreasonable effort. In addition, the Company believes such a
reconciliation would imply a degree of precision and certainty that
could be confusing to investors. The variability of the specified
items may have a significant and unpredictable impact on the
Company’s future GAAP results.
In addition, the Company’s non-GAAP financial guidance in this
release excludes the impact of any potential additional future
strategic acquisitions and any specified items that have not yet
been identified and quantified. The guidance also excludes
macro-economic effects due to the COVID-19 pandemic that are not
yet quantifiable. The financial guidance is subject to risks and
uncertainties applicable to all forward-looking statements as
described elsewhere in this press release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201201005473/en/
AdaptHealth Corp. Jason Clemens, CFA Chief Financial
Officer (484) 301-6599 jclemens@adapthealth.com
Brittany Lett Vice President, Marketing (909) 915-4983
blett@adapthealth.com
The Equity Group Inc. Devin Sullivan Senior Vice
President (212) 836-9608 dsullivan@equityny.com
Kalle Ahl, CFA Vice President (212) 836-9614
kahl@equityny.com
AdaptHealth (NASDAQ:AHCO)
Historical Stock Chart
From Apr 2024 to May 2024
AdaptHealth (NASDAQ:AHCO)
Historical Stock Chart
From May 2023 to May 2024