RICHMOND, Va. - Owens & Minor, Inc. (NYSE: OMI), a global healthcare solutions company, announced today it has agreed to purchase Rotech Healthcare Holdings, Inc., a provider of home medical equipment, for $1.36 billion in cash. After accounting for anticipated tax benefits, the net acquisition cost is estimated to be approximately $1.32 billion.
This transaction is in line with Owens & Minor's strategy to expand its Patient Direct segment and bolster its position in the burgeoning home-based care market. Rotech, headquartered in Orlando, Florida, operates in 46 states with approximately 325 locations and has a workforce of over 4,200. In 2023, the company reported revenues of around $750 million and an EBITDA margin close to 30%.
Edward A. Pesicka, President & CEO of Owens & Minor, expressed enthusiasm about the acquisition, highlighting it as a rare opportunity to integrate a high-caliber business like Rotech into their portfolio. Pesicka also emphasized the company's disciplined approach to growth and its commitment to delivering enhanced services to patients, providers, and payors.
The acquisition is poised to strengthen Owens & Minor's offerings in several areas, including respiratory, sleep apnea, diabetes, and wound care, while providing access to the durable medical equipment market. It also aims to serve a broader customer base more effectively and address the needs of patients with chronic conditions in a fragmented market.
Owens & Minor anticipates achieving approximately $50 million in synergies by the third year post-acquisition.
The deal, which is expected to close by the end of 2024, will be financed through a combination of cash and incremental borrowings. Owens & Minor plans to reduce its leverage to below 3.0x within 24 months following the deal's closure.
The acquisition has received unanimous approval from both companies' Boards of Directors and is subject to customary closing conditions, including the Hart Scott Rodino Act.
This announcement comes alongside Owens & Minor's preliminary second-quarter results and a reaffirmation of their 2024 full-year guidance in a separate press release. The information provided in this article is based on a press release statement from Owens & Minor.
In other recent news, global healthcare solutions company, Owens & Minor, released its preliminary financial results for Q2 2024, projecting steady performance despite a one-time income tax charge of $17 million.
The company's revenue for the quarter is estimated to range between $2.65 billion and $2.67 billion, with an adjusted EBITDA of $123 million to $127 million. Owens & Minor maintains its 2024 revenue forecast at $10.5 billion to $10.9 billion and an adjusted EBITDA of $550 million to $590 million. These projections exclude the potential impact of the Rotech acquisition.
In the realm of stock analysis, Citi upgraded Owens & Minor's status from Neutral to Buy, although with a reduced price target of $19.00. This decision follows a 40% drop in the company's shares since the first quarter earnings report.
Meanwhile, Baird revised its price target for the company, reducing it to $19.00 while maintaining a Neutral rating, reflecting broader challenges within the sector.
In executive developments, Owens & Minor promoted Snehashish Sarkar to Executive Vice President and Chief Information Officer, signaling a commitment to enhancing its technological capabilities.
InvestingPro Insights
As Owens & Minor (NYSE: OMI) makes a strategic move to enhance its Patient Direct segment through the acquisition of Rotech Healthcare, the company's financial health and market position come into focus. According to InvestingPro data, Owens & Minor has a market capitalization of approximately $1.17 billion, indicating a substantial presence in the healthcare solutions sector. Despite a challenging period with a P/E ratio currently standing at -30.04, the company's valuation implies a strong free cash flow yield, which is a positive sign for potential investors looking for companies that can generate cash.
InvestingPro Tips suggest that Owens & Minor is a prominent player in the Healthcare Providers & Services industry, which aligns with its recent move to acquire Rotech Healthcare and expand its home-based care services. Analysts are optimistic about the company's future, predicting that Owens & Minor will be profitable this year. This is further supported by the fact that Owens & Minor is trading at a low revenue valuation multiple, which could indicate that the stock is undervalued relative to its sales.
Investors interested in deeper analysis and additional insights on Owens & Minor can explore more InvestingPro Tips, which include 11 additional tips for the company, by visiting https://www.investing.com/pro/OMI. To get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, use the coupon code PRONEWS24.
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