Addus HomeCare Corporation (Nasdaq: ADUS) had intended to focus largely on home health and personal care acquisitions in 2022. But when a good hospice deal comes along, it’s difficult to pass up.
The Frisco, Texas-based Addus announced Wednesday that it has reached an agreement to acquire “substantially all the assets of” Glenview, Illinois-based JourneyCare for a purchase price of about $85 million. JourneyCare – one of the largest hospice and palliative care providers in Illinois – serves an average daily census of about 750 patients in 13 counties.
The transaction is expected to close “on or about” Feb. 1.
“We believe JourneyCare will be an ideal addition for Addus with an established market presence and excellent reputation for quality care,” Addus Chairman and CEO Dirk Allison said in a press release. “We look forward to expanding our market reach in Illinois and offering patient-centered hospice services to more individuals who will benefit from compassionate care in their homes.”
The acquisition of JourneyCare helps Addus keep last year’s M&A momentum going in 2022. By the end of 2021’s third quarter, the company had added combined total annualized revenue of about $30 million.
Personal care services remains the bulk of Addus’ business portfolio, but it has steadily added home health and hospice services. The company operates across 207 locations in 22 states overall, delivering services to roughly 44,500 individuals.
“Acquisitions are an important part of our growth strategy, and we are pleased to start 2022 on a strong note,” Allison continued. “Our development team continues to do an outstanding job of identifying strategic acquisitions, and our strong capital structure supports our ability to continue this successful track record.”
Addus will fund the JourneyCare transaction through a combination of cash on hand and its revolving credit facility. The provider doubled its revolving credit facility to $600 million during the second quarter of last year.
Strategically, JourneyCare makes sense for Addus because of its existing home health presence in the Chicago market. The company completed its acquisition of overlapping Summit Home Health in October.
Opportunities to build home health, hospice and personal care density in key markets has been key to Addus’ M&A strategy, a point reinforced by CFO Brian Poff during a Q3 2021 earnings call.
“We’re being very selective in what we’re looking to acquire, both from a valuation standpoint but also from [a strategic one] with where we have overlap in our service lines,” Poff explained.
Once the deal is finalized, JourneyCare will add about $55 million in annualized revenues. In an investment note, Stephens analysts estimated that Addus paid a run-rate EBITDA multiple of about 10.5 times – “an attractive multiple for a pure-play hospice asset relative to recent hospice industry deal comps.”
With a major hospice piece added to kick off 2022, it’s likely that Addus will redouble its home health and personal care M&A efforts. Executing deals in those areas may prove easier said than done, however, as the company has seen fewer acquisition opportunities come to market in recent months.
“I will say I think we’ve seen probably a little bit of a slowdown in maybe things coming to market through brokered processes,” Poff said during the Q3 call. “I think two, three, four, five months ago, there’s quite a bit more activity.”
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