Lincare: Fewer locations, more diversified product mix and continued organic growth

CLEARWATER, Fla. — What will Lincare Holdings look like under the wings of The Linde Group? Company officials painted a picture during a conference call last week.

First, Lincare will have fewer locations. The provider plans to reduce its number of locations by “100 or so” before Round 2 of competitive bidding kicks off July 2013. Right now, it has 1,091 locations, including 35 billing/collection offices and 31 pharmacies.

“We found in the first round of bidding, you didn't need to be as local as in the past, when providers were rewarded and grew faster for being local,” said John Byrnes, CEO of Lincare. “With everything based on price, we don't need as many locations.”

The conference call officially kicked off Linde's bid to buy Lincare for $41.50 per share in a deal with a total price tag of $4.6 billion. Linde plans to tender an offer in the next two weeks and close a subsequent merger in the third quarter of this year.

Second, Lincare will have a more diversified product mix. The provider plans to ramp up its fledgling businesses in INR monitoring (home testing for patients on anti-coagulant therapy), pulmonary rehab and specialty pharmacy. The thinking: Patients on home oxygen therapy are likely candidates for other products and services due to co-morbidities.

“What we really like about the group is now we have the ability to grow some of these businesses much faster than we would have as a standalone,” Byrnes said.

One move Lincare won't be making, at least not right away: Going on a buying spree. The provider plans to continue getting 80% to 90% of its growth organically.

“Every company in the United States is for sale, because everyone is having such a hard time,” Byrnes said. “We can certainly make acquisitions over time, but the management team going forward needs to make that decision.”

Looking at the big picture, Lincare, with Linde's support and backing, plans to thrive where others stumble as successive rounds of competitive bidding continue to eat away at margins.

“We will mitigate the EBITDA issue that will arise from Round 2 of competitive bidding and we think we're way ahead of the game getting there,” Byrnes said. “We fully intend to meet and exceed the expectations that are put upon us.”