As aging Boomers increasing turn to home healthcare, Owens & Minor, Inc. announced that it will acquire Rotech Healthcare Holdings, Inc. for $1.36 billion. The all-cash deal is expected to produce $40 million in tax benefits. Owens & Minor plans to finance the acquisition with cash on hand along with significant debt, which will raise the corporation’s book leverage to 4.2x – a figure the company plans to pay down to below 3.0x within 24 months of the deal’s close.
“Rotech is a national leader in providing home medical equipment in the United States,” according to the deal’s press release. “The company has over 4,200 employees and provides products and services in 46 states through approximately 325 operating locations.”
Home healthcare is big business – and projected to balloon in the coming years. Home care encompasses a range of treatments, including after surgery care, wound treatment, physical therapy, disease management, and patient education. In home treatment enables patients to reduce their hospital stays and treat chronic conditions without the need to move to nursing homes and other care centers.
In home care is expanding rapidly due to two primary driving factors: demographics and technology. Baby-boomers, the enormous generation of individuals born following World War II (specifically between 1946 and 1964), began turning 65 in 2011. As the following graph depicts, the aging population is ballooning across the United States – and the chronic ailments that accompany aging are rising along with it.
At the same time that demand for care is rising, technology has made home treatment more possible. The wide availability of video conferencing permits doctors to meet with patients remotely. Wearable devices permit providers to monitor patients from afar. Once enormous medical hardware that was only available in hospitals has become portable. Many providers and patients have embraced this technology to avoid prolonged stays at traditional healthcare facilities.
Annual Cost of Nursing Home Care
The U.S.’s aging population has increasing turned in-home care to improve their quality of life – as well as save their bank accounts. Not only does in-home care often permit patients to maintain many of their daily activities and community involvement, it is also often significantly less expensive than treatment facilities. The average annual cost of nursing homes has skyrocketed in the past two decades, jumping from approximately $65,000 in 2004 to over $108,000 today. Owens & Minor and Rotech intend to capitalized on this strong demand for home care.
According to DealPulse’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, Owens & Minor is advised by law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, while Rotech is advised by Kirkland & Ellis LLP.
