US-based medical logistics company Owens & Minor has agreed to acquire Rotech Healthcare Holdings, a home-based medical equipment provider, in an all-cash transaction worth $1.36bn.
The transaction is expected to provide tax benefits of up to $40m, which makes the net purchase price around $1.32bn.
The Board of Directors of both companies have unanimously approved the agreement.
The transaction is expected to be completed by the end of the year, subject to certain customary closing conditions, including the Hart Scott Rodino Act.
Upon closing, Owens & Minor anticipates a book leverage of around 4.2x and aims to reduce it below 3.0x within 24 months.
Owens & Minor is backed by fully committed financing and intends to use a combination of cash and incremental borrowings to fund the purchase acquisition.
Owens & Minor president and CEO Edward Pesicka said: “Rotech squarely fits into our existing Patient Direct segment and directly aligns with the strategy we outlined last December during our Investor Day, supporting our expansion in the very large and fast-growing home-based care space.
“We are excited to acquire a high-quality company like Rotech, an opportunity that doesn’t come along very often, and I look forward to welcoming the Rotech teammates into the Owens & Minor family.
“This transaction highlights our disciplined approach toward inorganic growth, with a focus on strategic fit, value creation for shareholders, prudent capital allocation and most importantly, providing improved service and experience to patients, providers, and payors.”
Rotech is a provider of home-based medical equipment in the US, with more than 4,200 employees serving in 46 states through nearly 325 operating locations.
Last year, the company generated around $750m of revenue and nearly 30% EBITDA margin.
Owens & Minor said the transaction would strengthen its Patient Direct product offerings and provide access to the Durable Medical Equipment (DME) market.
The combined customer base allows the medical supplies distributor to better serve providers and payors across an integrated national network.
The deal enables Owens & Minor to serve patients with chronic conditions in large and fragmented markets, through the combined suite of complementary product offerings and improved service.
Also, the acquisition provides a significant synergy of around $50m by the end of the third year, with further upside potential, and advances the growth in the Patient Direct segment.
Citi served as an exclusive financial advisor and Kirkland & Ellis as legal advisor to Owens & Minor, in connection with this transaction.
Also, Jefferies served as an exclusive financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison as legal advisor to Rotech.
Rotech president and CEO Robin Menchen said: “The team and I look forward to being part of Owens & Minor due to their commitment to providing best-in-class products and services to patients in their homes.
“Owens & Minor is a natural home for the Rotech team, and we believe the combination will benefit patients, providers, payors, and employees.”
