Following the completion of lucrative acquisition and joint venture activity during 2018, LHC Group (NASDAQ: LHCG) will make M&A and JV transactions a cornerstone of its 2019 growth strategy.
LHC on Thursday reported a record $8.226 million in revenue tied to acquisitions and joint ventures for full year 2018. Among the company’s 2019 plans is leveraging their national platform through additional acquisitions and closing new joint ventures with small and large health systems.
Earlier this week the company announced the purchase of a majority share in management of Geisinger Home Health and Hospice and its subsidiary AtlantiCare Home Health and Hospice, for an undisclosed sum.This follows on the heels of an April 2018 merger with hospice, personal care, and home health provider Almost Family in an all-stock transaction with an implied value of $2.4 billion.
“We’re more bullish on the JV strategy today then we’ve been in the past—and we’ve been very bullish on it in the past,” said LHC Group CEO Keith Myers.
This robust acquisition strategy has attracted industry attention; LHC reported that the majority of its current M&A and JV prospects came to their attention via inbound calls, a significant change from previous years.
LHC’s low leverage balance sheet and free cash flow align the company to complete $100 million to $150 million in acquisitions annually while remaining under 2x leverage, according to the company’s fourth quarter 2018 earnings report. LHC saw an adjusted free cash flow of $110 million in 2018.
“Our balance sheet remained strong with leverage at 1.2x adjusted EBITDA year-end,” explained Chief Financial Officer Joshua Proffitt. “With $240 million available on our credit facility and an accordion feature that can provide an additional $200 million of capacity, we are well-positioned to remain in growth mode on the acquisition front for the foreseeable future.”
Other recent M&A activity included a joint venture partnership with Arkansas-based Unity Health, expected to account for $4 million in annual revenue. During 2018 the company entered into a joint venture with Lifepoint Healthcare, sharing ownership of 14 hospice locations as well as several home health outlets. The LHC-Lifepoint joint venture went on to acquire the home health and hospice care providers Guardian Health Services and Commonwealth Health Care.
“In each case, our ability to show these partners a very compelling value proposition backed up by national scale was a critical factor in their decision making,” Meyers said. “We expect more of the same for M&A activity in 2019 with both large and smaller partners. Our acquisition pipeline is robust and we continue to review 15 to 20 highly vetted transactions at any given time.”