AdaptHealth is the Third Largest Distributor of
Home Medical Equipment in the United States
Combined Company Expected to Trade on the
NASDAQ post-close
DFB Healthcare Acquisitions Corp. ("DFB") (NASDAQ: DFBH,
DFBHU, DFBHW), a special purpose acquisition company sponsored
by Deerfield Management (“Deerfield”) and Richard Barasch,
announced today that it has entered into a definitive agreement for
a business combination with AdaptHealth Holdings, LLC (“Adapt” or
the “Company”), the third largest distributor of home medical
equipment (“HME”) in the United States. Upon the closing of the
transaction, it is expected that DFB will be renamed AdaptHealth
Holding Corporation ("AdaptHealth") and remain NASDAQ-listed under
a new ticker symbol.
The combined company will represent an initial enterprise value
of approximately $1.0 billion and market capitalization of
approximately $800 million.
Adapt’s management and major equity holders will roll their
equity into AdaptHealth, and proceeds generated by the transaction
will be used by AdaptHealth primarily to reduce debt and fund
future growth and acquisitions. A fund managed by Deerfield has
signed a subscription agreement to support the transaction to
backstop redemptions and/or provide additional capital to the
Company. Adapt’s current management team is expected to remain in
place, supplemented by Richard Barasch as newly appointed Chairman
of AdaptHealth.
Adapt: A Leading Provider of Home
Medical Equipment
Founded in 2012 and headquartered in Plymouth Meeting, PA, Adapt
offers a full suite of medical products for both rental and sale,
with a focus on respiratory and/or mobility equipment, including
CPAP sleep equipment, oxygen equipment, wheelchairs, walkers, and
hospital beds. Adapt serves over 1.0 million patients and performs
7,000 deliveries per day across 49 states through more than 150
locations. The Company has created a scalable, purpose-built, and
centralized operating platform that optimizes client service and
delivery, improves compliance, drives operational and financial
efficiencies, and increases enterprise-wide profitability.
The Company utilizes an extensive and highly diversified network
of referral sources, including acute care hospitals, sleep labs,
pulmonologists, skilled nursing facilities, and clinics; many of
these referral relationships average 10+ years. Adapt maintains an
attractive payor mix, primarily comprised of commercial insurers,
Medicare and Medicaid.
A Record of Growth and Consolidation in
an Expanding Industry
Adapt currently operates in a growing segment of the HME
industry, which represents an estimated $12-$15 billion total
market, within a broader HME industry representing $56 billion in
total market value and forecasted to produce a CAGR of 6.1% through
2026. Multiple industry tailwinds are driving this expansion,
including: favorable demographic trends, specifically the rise in
individuals over the age of 65; increasing life expectancy; growing
patient desire to receive care in the home; the economic advantages
of home care versus institutional care; and the increasing
prevalence of medical issues for which HME is indicated, such as
chronic obstructive pulmonary disease, congestive heart failure,
and sleep apnea.
The combination of industry growth and government mandates to
reduce costs to patients in the largest HME spending categories has
allowed Adapt to execute a strategy of organic growth, accretive
acquisitions, and market-leading profitability in a highly
fragmented industry landscape. Since 2012, Adapt has acquired 56
companies with an aggregate purchase price of approximately $286
million and has employed proprietary techniques alongside industry
expertise to derive significant value from these acquired
businesses.
Adapt intends to continue to focus on increasing net revenue
both organically and via accretive acquisitions and has identified
a significant volume of potential acquisition opportunities it will
target in late 2019 and early 2020.
Seasoned Management Team and
Board
Adapt’s management team is comprised of seasoned industry and
financial professionals, led by Chief Executive Officer, Luke
McGee, President, Josh Parnes, and Chief Financial Officer, Gregg
Holst.
Richard Barasch, who will be appointed Chairman of AdaptHealth
upon closing of the transaction, was Chairman and CEO of Universal
American, an NYSE-listed health insurance and healthcare services
company until its sale to WellCare Health Plans in 2017.
“We believe that in order to be successful in the evolving HME
marketplace, companies must possess scale and technological
expertise without sacrificing service and product diversity,” said
Mr. McGee. “We expect to remain an active participant in the
consolidation of our industry, while adhering to our core
principles of providing tailored healthcare products and services
that empower patients to live their best lives. We look forward to
this next, exciting phase of our growth.”
“Healthcare is increasingly moving into the home and we believe
Adapt occupies a unique place in the home-based healthcare value
chain as the most efficient provider in the space,” said Mr.
Barasch. “We believe the Company’s multiple touch points for
patients with chronic conditions and its demonstrated ability to
provide efficient solutions should become increasingly valuable as
health care continues to migrate to the home. I am eager to work
with Luke, Josh and their team as they continue their growth."
Key Financial Metrics
Adapt’s net revenue has grown from $174 million in 2016 to an
estimated $522 million in 2019. Adjusted EBITDA has increased from
$33 million in 2016 to an estimate of more than $130 million in
2019. For 2020, net revenue is expected to rise to $583 million
with Adjusted EBITDA expected to increase to approximately $152
million. These projections exclude the impact of any future
additional acquisition activity, and based on the current pipeline
of acquisitions, the company believes it can add approximately $100
million of acquired revenue each year.
$ in MMs
2016A
2017A
2018PF4
2019E
2020E
Net Revenue1
$174.2
$192.5
$414.6
$521.8
$582.5
Adjusted EBITDA2
$32.9
$45.0
$94.5
$130.5
$151.5
Adjusted EBITDA Less Patient Capital
Expenditures3
$7.4
$19.1
$50.4
$75.0
$90.6
- Net revenue includes provision for bad debt
- Non-GAAP measure; see reconciliation table in this release
- Spend to procure rental product units to support rental
business. Patient equipment capex comprises over 95% of total
capital expenditures
- 2018 PF includes adjustment for Verus, PPS and HME acquisitions
to be effective 1/1/18
The combined company represents a total enterprise value of
approximately $1.0 billion at closing, or 8.0x 2019E Adjusted
EBITDA and 6.9x 2020E Adjusted EBITDA. If capital expenditures
(“capex”) are excluded, the multiples are 13.9x 2019E Adjusted
EBITDA less patient capex and 11.5x 2020E Adjusted EBITDA less
patient capex. Both sets of multiples exclude the impact of any
future additional acquisition activity by the Company.
Key Transaction Terms
The transaction will be funded by cash from the DFB trust
account (currently approximately $253 million) and Deerfield has
committed to participate for up to a maximum of $100 million in a
private placement of common stock at $10.00 per share. Adapt’s
management and major equity holders will roll their equity into the
new public company, and proceeds generated by the transaction will
be available to AdaptHealth to fund future growth. The Company
anticipates rolling its existing senior credit facility as part of
the transaction.
Assuming $50 million of the transaction proceeds are used to
provide liquidity to Adapt minority equity holders, DFB will issue
approximately 49 million shares to current Adapt equity holders,
valued at $10.00 per share, as part of the transaction. In
addition, current Adapt equity holders will be entitled to receive
an additional earn out payment of up to 3 million total AdaptHealth
shares, with 1 million shares vesting if the average stock price is
at least $15.00 in December 2020, 1 million vesting if the average
stock price is at least $18.00 in December 2021, and 1 million
vesting if the average stock price is at least $22.00 in December
2022. Assuming no redemptions of DFB public shares, current Adapt
equity holders will own 59%, DFB shareholders will own 27%, DFB’s
sponsor will own 5%, and Deerfield will own approximately 9%
respectively of the issued and outstanding shares of common stock
of AdaptHealth immediately following the closing.
The transaction, which has been approved by the board of
directors of DFB and the board of managers of Adapt, is expected to
close in the fourth quarter of 2019 subject to, among other
customary conditions, approval by DFB shareholders and DFB having a
minimum of $225 million of cash at closing, of which $25 million
may come from the DFB Trust account invested by Deerfield and up to
$100 million from the additional Deerfield equity investment.
A more detailed description of the transaction terms and a copy
of the merger agreement will be included in a current report on
Form 8-K to be filed by DFB with the United States Securities &
Exchange Commission (“SEC”). DFB will file a proxy statement with
the SEC in connection with the transaction.
Deutsche Bank Securities and Goldman Sachs are acting as
financial advisors and capital markets advisors. Jefferies and
Leerink are also acting as capital markets advisors to DFB. Stifel
is acting as financial advisor to Adapt. Greenberg Traurig, LLP and
McDermott Will & Emery are acting as legal advisor to DFB, Paul
Hastings is acting as legal advisor to Deerfield, and Willkie Farr
& Gallagher LLP is acting as legal advisor to Adapt.
Management Presentation
Information
The management of Adapt and DFB will make a presentation
regarding the transaction on July 8, 2019 at 11:00 AM ET. In
connection with this event, DFB will file an investor presentation
with the SEC which can be viewed at www.sec.gov.
For those who wish to participate, the domestic toll-free access
number is (888) 820-4544 and the international toll-free access
number is (470) 279-3876. Once connected with the operator, please
provide the Conference ID number of “DFB250” and request access to
the DFB Healthcare Acquisition Corp Investor Call. A replay of the
call will be available from July 8, 2019 through August 8, 2019. To
access the replay, the domestic toll-free access number is (855)
213-8235 and the international toll-free access number is (571)
982-7683 and participants should provide the pin code of 61055# and
request access to the DFB Healthcare Acquisition Corp call.
Important Information and Where to Find
It
A full description of the terms of the transaction will be
provided in a proxy statement for the stockholders of DFB (the
“Proxy Statement”), to be filed with the SEC. DFB urges investors,
stockholders and other interested persons to read, when available,
the preliminary Proxy Statement as well as other documents filed
with the SEC because these documents will contain important
information about DFB, Adapt and the transaction. The definitive
Proxy Statement will be mailed to shareholders of DFB as of a
record date to be established for voting on the proposed
transaction. Stockholders will also be able to obtain a copy of the
Proxy Statement, without charge, by directing a request to: DFB
Healthcare Acquisitions Corp., 780 Third Avenue, New York, NY
10017. The preliminary and definitive Proxy Statement, once
available, can also be obtained, without charge, at the SEC’s
website (www.sec.gov).
Participants in the Solicitation
DFB, Adapt and their respective directors and executive officers
may be considered participants in the solicitation of proxies with
respect to the proposed transaction described in this press release
under the rules of the SEC. Information about the directors and
executive officers of DFB is set forth in DFB’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2018, which was
filed with the SEC on March 29, 2019.
Information regarding the persons who may, under the rules of
the SEC, be deemed participants in the solicitation of the
shareholders in connection with the proposed transaction will be
set forth in the Proxy Statement when it is filed with the SEC.
These documents can be obtained free of charge from the sources
indicated above.
Non-Solicitation
This press release is not a proxy statement or solicitation of a
proxy, consent or authorization with respect to any securities or
in respect of the proposed transaction and shall not constitute an
offer to sell or a solicitation of an offer to buy the securities
of DFB or Adapt, nor shall there be any sale of any such securities
in any state or jurisdiction in which such offer, solicitation, or
sale would be unlawful prior to registration or qualification under
the securities laws of such state or jurisdiction. No offer of
securities shall be made except by means of a definitive
document.
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 closing of the proposed transaction and the
private placement. These statements are based on various
assumptions and on the current expectations of DFB and Adapt
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 DFB and Adapt. These forward-looking
statements are subject to a number of risks and uncertainties,
including the outcome of judicial and administrative proceedings to
which Adapt may become a party or governmental investigations to
which Adapt may become subject that could interrupt or limit
Adapt’s operations, result in adverse judgments, settlements or
fines and create negative publicity; changes in Adapt’s clients’
preferences, prospects and the competitive conditions prevailing in
the healthcare sector; the inability of the parties to successfully
or timely consummate the proposed transaction, including the risk
that any required regulatory approvals are not obtained, are
delayed or are subject to unanticipated conditions that could
adversely affect the combined company or the expected benefits of
the proposed transaction or that the approval of the stockholders
of DFB and/or the stockholders of Adapt for the proposed
transaction is not obtained; failure to realize the anticipated
benefits of the proposed transaction, including as a result of a
delay in consummating the proposed transaction or a delay or
difficulty in integrating the businesses of DFB and Adapt; the
amount of redemption requests made by DFB’s stockholders; those
factors discussed in DFB’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2018 under the heading “Risk
Factors,” and other documents of DFB filed, or to be filed, with
the SEC. 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 neither DFB nor Adapt presently know or that DFB and Adapt
currently believe are immaterial that could also cause actual
results to differ from those contained in the forward-looking
statements. In addition, forward-looking statements reflect DFB’s
and Adapt’s expectations, plans or forecasts of future events and
views as of the date of this press release. DFB and Adapt
anticipate that subsequent events and developments will cause DFB’s
and Adapt’s assessments to change. However, while DFB and Adapt may
elect to update these forward-looking statements at some point in
the future, DFB and Adapt specifically disclaim any obligation to
do so. These forward-looking statements should not be relied upon
as representing DFB’s and Adapt’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.
Non-GAAP Financial Measures
The financial information and data contained in this press
release is unaudited and does not conform to Regulation S-X.
Accordingly, such information and data may not be included in, may
be adjusted in or may be presented differently in, any proxy
statement or registration statement to be filed by DFB or Adapt
with the SEC. Some of the financial information and data contained
in this press release, such as adjusted EBITDA, has not been
prepared in accordance with United States generally accepted
accounting principles (“GAAP”). A reconciliation of certain of
these non-GAAP financial measures to their most comparable GAAP
measure is set forth in a table included at the end of this press
release.
DFB and Adapt believe these non-GAAP measures of financial
results provide useful information to management and investors
regarding certain financial and business trends relating to Adapt’s
financial condition and results of operations. DFB and Adapt
believe that the use of these non-GAAP financial measures provides
an additional tool for investors to use in evaluating ongoing
operating results and trends in and in comparing Adapt’s financial
measures with other similar companies, many of which present
similar non-GAAP financial measures to investors. Management of
Adapt does not consider these non-GAAP measures in isolation or as
an alternative to financial measures determined in accordance with
GAAP. The principal limitation of these non-GAAP financial measures
is that they exclude significant expenses and income that are
required by GAAP to be recorded in Adapt’s financial statements. In
addition, they are subject to inherent limitations as they reflect
the exercise of judgments by management about which expense and
income are excluded or included in determining these non-GAAP
financial measures. In order to compensate for these limitations,
management presents non-GAAP financial measures in connection with
GAAP results. You should review Adapt’s audited financial
statements, which will be presented in DFB’s preliminary proxy
statement to be filed with the SEC, and not rely on any single
financial measure to evaluate Adapt’s business.
AdaptHealth Pro Forma Adjusted EBITDA
Bridge to Net Income
$ in MMs
2016A
2017A
2018PF1
Net (Loss) Income
($6.9)
$6.8
$12.2
Plus: Interest expense
5.8
5.0
8.0
Plus: Income tax (benefit)
expense
(0.2)
0.2
(2.1)
Plus: Depreciation &
amortization
29.7
31.23
60.4
Plus: Loss on extinguishment of
debt
-
0.3
1.4
Plus: Loss from discontinued
ops
0.4
0.2
-
EBITDA
$28.7
$43.9
$79.9
Plus: Non-recurring expense
adjustments
4.2
1.1
5.3
Adjusted EBITDA
$32.9
$45.0
$85.2
Plus: Pro forma adjustments1
Verus
5.7
PPS
1.7
HME
1.8
Pro forma Adjusted EBITDA
$94.5
- Includes the full year effect of the Verus, PPS and HME
acquisitions to be effective 1/1/18
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190708005381/en/
DFB Healthcare Chris Wolfe (212) 769-4546 chris.wolfe@dfbhealthcare.com
DFB Investor Relations The Equity Group Inc. Devin
Sullivan Senior Vice President dsullivan@equityny.com (212)
836-9608
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