AdaptHealth, AeroCare deal to 'accelerate' growth

PLYMOUTH MEETING, Pa. - After operating on parallel acquisition tracks for the past few years, AdaptHealth will acquire AeroCare Holdings for $1.1 billion in cash and 31 million shares, for a total purchase price of about $2 billion, in the biggest deal in HME in years.

Both companies have made acquisitions a cornerstone of their growth plans: Since 2017, AdaptHealth has closed 64 transactions; AeroCare has closed 50. Since its inception, AeroCare has closed a total of 155 transactions, building a presence spanning 300 locations across 30 states.

The timing was right to combine the two companies, says Luke McGee, CEO of AdaptHealth.

“We watched what they've built over the last seven years and had off-and-on conversations,” he said. “Rates have stabilized on the horizon, with competitive bidding postponed. The combined company will maintain a long-term strategy of delivering connected health care in the home.”

McGee and Steve Griggs, CEO of AeroCare, will jointly lead the company as co-CEOs, with McGee focused on the capital market side of the business and Griggs on the operational side of the business. Josh Parnes will continue to serve as president.

AeroCare is expected to contribute adjusted EBITDA of $230 million to $115 million in 2021, excluding cost synergies of approximately $50 million on an annual basis. Those cost synergies include consolidating direct suppliers, renegotiating rebates and restructuring indirect spending, and centralizing core administrative functions.

Company officials also highlighted the technology strengths of AdaptHealth and AeroCare as a key part of their strategy.

“AeroCare has developed technology that streamlines patient communication, and AdaptHealth has made significant progress in the tech of e-prescribing and revenue cycle management,” Parnes said. “Through combining our collective tech strategy, we anticipate being able to achieve better customer experience, as well as a more efficient operating model.”

Company officials say growth, organic and through acquisitions, will continue. AdaptHealth has also announced acquisitions of two diabetes providers: New England Home Medical Equipment, a leading supplier of CGMs throughout the Northeast, with net revenues of $31 million in 2019; and Pinnacle Medical Solutions in the Southeast. Additionally, it is acquiring the HME division of Allina Health in Minnesota.

“We're excited to partner with a leader in the industry,” said Steve Griggs, CEO of AeroCare. “We are proud of our growth in key geographic markets. I'm confident growth will accelerate as a result of combining best practices.”