Addus HomeCare Corporation (NASDAQ: ADUS) has entered into a definitive agreement to acquire Queen City Hospice, LLC, and its affiliate Miracle City Hospice, for a cash purchase price of $192.0 million. Queen City is a portfolio company of the private equity firm Stonehenge Partners.
The purchase price includes $162.8 million of value, net of the present value of $29.2 million in estimated tax benefits, financed through a mix of cash on hand and Addus’ revolving credit facility. The transaction aligns with Addus’ growth strategy of co-locating hospice and home health assets in markets in which they already have a substantial presence for their personal care business line.
“We look forward to working with the experienced operational leadership team at Queen City Hospice and its clinical staff of over 600 employees. Importantly, we share the same dedication to patient-centered hospice services that allow consumers to receive quality, compassionate care in their homes,” Dirk Allison, Addus president and CEO, said. “We believe this acquisition is a great strategic fit for Addus, and we look forward to the additional opportunities for growth through our combined operations. Queen City Hospice has annualized revenues of approximately $56 million, and we expect this transaction to be immediately accretive to our financial results.”
With this acquisition, Ohio will be the second state in which Addus operates all three of its business lines in the same market.
When Allison took the helm of Addus in 2016, his management team was already familiar with one another having worked together at a previous company. Early in their tenure the management group decided they would add clinical services to supplement the markets in which they already had a personal care footprint, Allison told Hospice News.
The company saw success building its home health and hospice business lines. Addus found particular success in New Mexico, the first state in which it was able to offer all three of its clinical and nonclinical services.
“We wanted to replicate that in certain markets, with Ohio being one of the markets we had targeted. We already had a very strong personal care presence there, as well as a home health license that we could expand,” Allison told Hospice News. “When Queen City decided they wanted to go through the process of selling, we were contacted by their investment banker. I think they knew of our desire to get further into hospice in certain markets, and it just made a lot of sense. All of a sudden became a very strategic acquisition for us.”
Hospice utilization in Ohio during 2018 reached 56.7% Ohio ranks sixth in the nation for hospice utilization among Medicare decedents at 56.7% as of 2018, according to the National Hospice & Palliative Care Organization.
Demographic tailwinds are expected to fuel further hospice growth in Ohio, where more than 17% of the state’s 11.5 million residents were 65 and older as of 2018, according to the U.S. Census Bureau. The Mid-Ohio Regional Planning Commission estimates that this percentage would likely double by 2050.
This is the third acquisition in 2020 for Addus. The three deals are expected to bring in a total $82 million annually. Allison indicated that the company had additional hospice, home health and personal care transactions in its pipeline.
Cincinnati-based Queen City Hospice serves nearly 900 patients each day in its home city as well as Columbus and Dayton. Queen City itself was on a strong growth trajectory leading up to this sale. The company’s CEO James Vannelle discussed its plans for expansion through acquisitions and de novos with Hospice News in September,
In September, Queen City expanded to Cleveland with the acquisition of Miracle City Hospice for an undisclosed sum. Ownership of Miracle City will also go to Addus via the sale.
“We are excited to have our team join the Addus family and believe this will be a great opportunity for everyone associated with Queen City Hospice. We are mindful of our critical role in meeting the demand for quality end of life care and supporting the patients and families we serve,” Vannelle said. “We recognize this same level of commitment in the Addus team, and we look forward to working together to extend our market reach so that Queen City Hospice can provide quality hospice services to more patients.”