Zinger Key Points
- The deal strengthens Owen & Minor's Patient Direct offerings and accelerates the growth path.
- Rotech generated approximately $750 million of revenue and an EBITDA margin of nearly 30% in 2023.
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On Tuesday, Owens & Minor Inc. OMI agreed to acquire Rotech Healthcare Holdings, Inc., a privately held home-based care business headquartered in Orlando, Florida, for $1.36 billion in cash.
Given anticipated tax benefits of approximately $40 million from the transaction, the net purchase price is approximately $1.32 billion, representing approximately a 6.3x multiple of LTM EBITDA, excluding synergies.
Rotech provides home medical equipment in the U.S. The company has over 4,200 employees and provides products and services in 46 states through approximately 325 operating locations.
Rotech generated approximately $750 million of revenue and an EBITDA margin of nearly 30% in 2023.
The deal strengthens Owen & Minor’s Patient Direct product offerings through expansion across a complementary portfolio and accelerates the growth path for the Patient Direct segment as outlined at the December 2023 Investor Day to achieve $5 billion in revenue by 2028.
The transaction provides a significant synergy opportunity of approximately $50 million by the end of year three, with further upside potential and prospects for additional revenue synergies in the near and long term.
Owens & Minor also announced selected preliminary financial results for the second quarter of 2024, with revenue of $2.65 billion—$2.67 billion versus a consensus of $2.64 billion.
The healthcare logistics services company sees adjusted EPS of $0.32 – $0.36 compared to a consensus of $0.31.
In the second quarter of 2024, the company incurred a one-time income tax charge of $17 million ($0.22 per share) due to a recent decision on Notices of Proposed Adjustments from 2020 and 2021, communicated in late June 2024. A related cash payment of $30-$35 million is expected in the second half of 2024. The company anticipates resolving the matter without further financial impact.
For 2024, Owens & Minor reaffirmed its revenue outlook of $10.5 billion-$10.9 billion compared to a consensus of $10.66 billion.
The company continues to see 2024 adjusted EPS of $1.40-$1.70 versus the consensus of $1.53.
Price Action: OMI stock is up 7.38% at $16.44 at last check Tuesday.
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