Hanger Closes ACP Acquisition - Analyst Blog

Hanger Orthopedic (HGR) has completed its acquisition of Nevada-based rehabilitation technologies provider Accelerated Care Plus (“ACP”) for $155 million in cash. The company has funded the acquisition (announced in October 2010) using available cash and by refinancing its credit facilities.

ACP specializes in developing rehabilitation technologies and is a leading provider of integrated clinical programs for post-acute and long-term care rehabilitation in the U.S. The entity has contracts to serve more than 4,000 long-term care facilities and post-acute rehabilitation providers across the nation. ACP's customers include 22 of the 25 largest skilled nursing facilities (“SNF”) operators nationwide.

The acquisition adds a fresh avenue of growth for Hanger and complements its healthcare offerings. It provides the company an opportunity to leverage ACP's strong foothold in the SNF market and expand its clinical solutions for post-acute and long-term care rehabilitation. Hanger expects ACP to generate sales of roughly $57 million in 2010. Moreover, it anticipated the acquisition to be earnings-neutral to slightly positive in 2010 and accretive in 2011.

Hanger is the market leader in the orthotic and prosthetic (O&P) patient care services market, operating through 678 patient care centers across the U.S. The company operates four business units: patient care, distribution, Linkia and Innovative Neurotronics. Linkia, the first managed care organization dedicated solely to the O&P market, remains a significant growth engine for Hanger.

Hanger's economies of scale are unmatched by its competitors which include notable players in the O&P space such as Orthofix International (OFIX), Conmed Corp. (CNMD), Exactech Inc. (EXAC) and Owens & Minor Inc. (OMI).

To expand its geographic presence, Hanger continues to pursue small tuck-in acquisitions. The company bought three companies (Dynamic Orthotics and Prosthetics of Texas, Nebraska Orthotic and Prosthetic Services, and Spectrum Prosthetics and Orthotics of Iowa) in June 2010 with consolidated revenues of $14 million. Hanger expects to complete its planned acquisitions in 2010 which would add roughly $20 million in annual sales.

However, Hanger's back-to-back acquisitions could lead to substantial integration risk. The company needs to fully synchronize its acquired operations so that they do not turn out to be a waste of resources. We are currently Neutral on Hanger.

 
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