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SPAC alert: Ex-Addus CEO-sponsored SPAC inks home care deal

Sarah Pringle
Sep 29, 2022
Illustration of a house wearing a stethoscope

Illustration: Eniola Odetunde/Axios

Consumer Direct Holdings, a self-directed in-home personal care network, is merging with SPAC DTRT Health Acquisition Corp at a $681 million valuation.

Why it matters: SPAC deals, while no longer the founder's favorite financing tool, are still alive. TBD how this one will go, but CDH has characteristics that make folks more comfortable tapping into this vehicle despite the public market's choppy waters.

Zoom in: Missoula, Montana-based CDH generates real earnings with visibility into future numbers, plays in a large and growing market, and importantly, its SPAC sponsor includes a bench of experienced health care execs and investors.

  • DTRT Health Acquisition's CEO is Mark Heaney, who during his 31 years at Addus HomeCare held both the COO and CEO posts, eventually leading its successful IPO in 2009.
  • COO Arion Robbins comes from health care PE firm Revelstoke Capital Partners and CFO Don Klink is the former CFO of United Dental Partners, VNA Health Care and Addus.

💭 Our thought bubble: CDH and DTRT are a good match given that CDH's closest public comp is Addus.

How it works: Whereas Addus recruits, hires and places third-party caregivers in an individual's home, CDH allows older adults and people with disabilities to choose their own non-medical caregiver — often a family member or close friend.

  • Acting as a tech-enabled program administrator, CDH facilitates and manages the various back-end functions to compensate caregivers of those patients that are eligible for public Medicaid assistance.
  • Long-term contracts with states offer visibility into numbers.

State of play: CDH is one of two scaled players in self-directed in-home care — the other being another under-the-radar player that recently garnered PE backing: Public Partnerships (PPL).

  • A deal was never announced, but Axios learned in August that DW Healthcare Partners and Linden Capital Partners quietly injected capital into PPL, which was said to generate some $20 million to $30 million of EBITDA.

Between the lines: Self-directed programs like CDH and PPL are growing as they solve for labor issues and as older adults demand greater autonomy as they age.

  • Family caregivers oftentimes face financial or emotional stress — particularly if forced to step away from paid jobs. These programs are a solution.
  • Likewise, it's a job creation opportunity for states, and potentially a more stable one. Whereas the agency model tends to see a lot of labor churn, caregivers that are family or friends are arguably more incentivized, one source explains.

By the numbers: The transaction expects to result in up to $300 million of total available liquidity on a consolidated basis — which CDH says is adequate to support ongoing operations, development and expansion.

  • The $681 million enterprise value implies 10.1x pro forma 2023 adjusted EBITDA — implying about $64 million of EBITDA.
  • Current equity holders will own approximately 61% of the company post-closing.

Who advised: Bank of Montana advised CDH, Deutsche Bank worked with DTRT and Lincoln International advised the board of directors.

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