In a $3.6 billion all-stock transaction, the home- and alternate-site infusion services company Option Care Health (NASDAQ: OPCH) will acquire Amedisys Inc. (NASDAQ: AMED).
Based on 2022 financial results, the combined companies earned roughly $6.2 billion, with adjusted EBITDA approaching $622 billion. Together, they would have a combined workforce of 16,500.
Option Care CEO John Rademacher and CFO Mike Shapiro will lead the combined company moving forward, with executives from both legacy providers fleshing out the C-Suite. Amedisys CEO Richard Ashworth will serve in a special advisor role. The home health and hospice provider’s CFO and acting COO Scott Ginn and chief strategy officer Nick Muscato will transition to the combined company in leadership roles.
The company’s board of directors will have seven members from Option Care Health and three from Amedisys.
“Today, we are seeing not only aging populations and growing desire for at-home health care services, but also increasing therapeutic pathways,” Rademacher said in a conference call. “Importantly, by expanding beyond our existing services, we’ll be able to better meet increasing demand for alternative-site care, and we believe the combined company’s capabilities and scale will position us to capture a significant share of the market.”
The relationship between Amedisys and Option Care began long before this merger. The two launched a partnership in 2021 to deliver home infusion services, particularly, at that time, to COVID-19 patients.
Post-merger, the company will be headquartered in Bannockburn, Illinois, where Option Care is currently based, but it will maintain Amedisys’ offices in Baton Rouge, Louisiana, and Nashville, Tennessee. Nationally, they will operate 674 locations across 46 states.
The transaction includes the assumption of net debt. Amedisys stockholders will receive 3.0213 shares of Option Care Health common stock for each share of Amedisys common stock they hold at the closing of the transaction. This is equivalent to $97.38 per Amedisys share, based on Option Care Health’s May 2 closing stock price.
This represents a premium of nearly 26% for Amedisys stockholders. Upon closing, which is expected to occur in the second half of the year, Option Care Health stockholders will own approximately 64.5% of the combined company, and Amedisys stockholders will own approximately 35.5%.
By the third year after closing, the companies expect to generate annual cost savings close to $75 million.
“The revenue synergies will be derived from the complementary nature of the businesses and referral growth in a substantially larger market,” Shapiro said in the conference call. “And the combined company will benefit from a more diversified revenue base through improving our collective access to private payers in government managed health plans.”
In addition to the more expansive payer mix, one of the drivers behind the decision to merge is a preference among payers and health systems to use a single provider for home health, infusion and hospice, Amedisys indicated.
“Relationships with providers and health systems are paramount to enabling patient care. Health system referral networks are increasingly looking for single provider partner for home health, infusion and hospice pathways and transitions,” Rademacher said. “Following the closing of the transaction, the combined company will be well-positioned to serve as that single partner with this offering across the alternate site care spectrum.”
Amedisys earned $556.4 million in net service revenue during Q1 2023, up $11.1 million in the prior year’s quarter. The company’s hospice segment accounted for $193.4 million of that, a slight increase from $193.1 million in Q1 2022.
The merger follows a series of massive transactions involving home health and hospice providers.
In February, the UnitedHealth Group (NYSE: UNH) subsidiary Optum Health closed its $5.4 billion purchase of LHC Group.
This followed Humana Inc.’s (NYSE: HUM) 2021 acquisition of Kindred at Home for $5.7 billion and its subsequent divestiture of a 60% stake in the company’s hospice and personal care segments to the private equity firm Clayton, Dubilier & Rice for $2.8 billion.
“This transaction also reflects the strength of our business and the great potential of care delivery in the hall, and we believe that will result in significant value for Amedisys stockholders and the benefit from the opportunity inherent in a financially stronger company with greater scale that is well positioned in alternate side care and home contracts together,” Ashworth said in the conference call. “The bottom line is we see tremendous upside from joining with Option Care Health for our patients, their families, providers, payers care teams and our stockholders.”
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