Linden sees 8x return on original HydraFacial investment amid $1.1bn SPAC merger

As HydraFacial agrees to merge with Vester Healthcare Acquisition Corp, Linden Capital Partners has so far generated an 8x return on original invested capital based on the SPAC’s current share price, LP sources with knowledge of the matter told PE Hub. 

The pending transaction, announced Wednesday, implies an initial enterprise value of $1.1 billion for HydraFacial, whose 30-minute signature facial is likened to a medical treatment and viewed as an alternative to microdermabrasion. 

Vester was co-founded by Brent Saunders, who is not only an industry veteran but an experienced dealmaker as the former CEO of Allergan, Forest Laboratories, and Bausch + Lomb. The former is best known as the maker of Botox injections. 

Linden is a current owner of HydraFacial alongside DW Healthcare Partners (based in Toronto and Park City, Utah), having joined hands in December 2016 to buy a majority interest in the beauty-health business. The firms are anticipated to retain a combined stake of about 25 percent upon completion of the deal. 

Linden will remain the largest individual shareholder going forward, Wednesday’s news release said. 

HydraFacial joins a flurry of PE-backed companies opting to join the public markets through the increasingly mainstream SPAC route this year.

That said, similar to other situations disrupted by the covid environment, a SPAC wasn’t always HydraFacial’s original intended outcome. Sources have previously told PE Hub that a traditional sale process for HydraFacial was well underway early this year, before a process was shelved amid pandemic-fueled market turmoil.

With the path ultimately pursued, the transaction will leave HydraFacial with $100 million in cash and no debt, the news release said. Supporting the transaction is a $350 million PIPE, which includes Fidelity Management & Research, Redmile Group, Principal Global Investors, Camber Capital Management and Woodline Partners.

Number four

For Linden, the deal represents the Chicago healthcare specialist’s fourth announced exit in this year of covid, joining ProPharma Group, Solara and Z-Medica. 

Odyssey Investment Partners bought ProPharma in a deal valuing the compliance-related pharma services company north of $500 million, PE Hub wrote in September. 

Elsewhere, the firm in May clinched a deal to sell Solara to publicly-traded AdaptHealth less than two years into its investment.

Adapt paid $425 million in cash for the provider of continuous glucose monitors, positioning Linden to make more than 3x its money and generate a more than 100 percent IRR on Solara, a source told PE Hub at the time. 

Most recently, Teleflex said in October it would buy Z-Medica, a manufacturer of hemostatic products, for $500 million in cash upfront, plus a potential earnout component of as much as $25 million. 

Linden this year also made what appears to be its first ever structured capital investment outside, announcing a preferred equity investment in IVX Health, a provider of infusion and injection therapy for patients with complex chronic conditions. The investment helped to fund the company’s acquisition of Precision Healthcare from BAI Healthcare Services.

Linden shortly after announced a majority investment in Vital Care, a franchisor of home infusion services throughout underserved secondaries markets. 

Linden declined to comment.