Onex completes Newport Healthcare buy at $1.3bn value

The deal for the teen-focused mental health platform provided an exit for Carlyle, which in 2017 backed Newport through its US Equity Opportunity Fund.

Onex Partners’ investment in Newport Healthcare values the network of mental health treatment centers tailored to teens and young adults at $1.3 billion, according to people familiar with the deal terms. 

Announced just over a month ago, Toronto-based Onex said Monday it had completed its majority acquisition of the business. With the transaction, Onex Partners V is approximately 60 percent invested, the announcement said. 

The deal concluded a Jefferies-run auction that kicked off around late April, sources said. With Onex’s new investment, Carlyle Group has exited its investment in full, they said. 

Representatives of Onex, Carlyle and Jefferies did not return PE Hub’s requests for comment on Monday. 

At $1.3 billion, the outcome exceeds sellers’ expectations of a $1 billion-plus valuation, as previously reported by PE Hub. The deal multiple varies depending on which EBITDA is applied; however, Newport expects to produce 2021 adjusted EBITDA north of $80 million, while trailing 12 month EBITDA is closer to the low-$70 million-range, some of the people said. 

Regardless, the Newport Beach, California, business has grown its EBITDA by at least threefold since Carlyle first invested. Suggesting a strong outcome for Carlyle, the company was projecting 2016 run-rate EBITDA just north of $20 million, sources said.

Although a deal was never publicly announced, sources in 2017 told PE Hub that Carlyle, following a Moelis-run sale process, had made an investment in Newport through its US Equity Opportunity Fund, which focuses on North American mid-market and growth opportunities. 

Newport Academy was launched in 2009 by executive chairman Jamison Monroe Jr, a recovering addict. The company, with a presence on both the West and East Coasts, provides treatment programs to teens and young adults who are struggling with trauma, mental health issues, eating disorders and substance abuse. 

Its services include female- and male-only residential treatment programs, outpatient substance abuse and mental health programs, as well as day schools, through which both recovery counseling and academic programming is offered. It also is focused on a higher-end clientele, sources said.

In 2019, industry veteran Joe Procopio was appointed CEO of Newport. The executive previously worked for 16 years at publicly-traded behavioral healthcare company Acadia Healthcare and CRC Health Group.

As the broader behavioral healthcare activity continues to command significant private equity interest, with telehealth proving among the more applicable modes of virtual care, sources say additional platforms are readying to come to market. 

One recent investment in particular speaks to the industry’s momentum – TPG‘s LifeStance Health. A little over a year after TPG, in the height of the pandemic, agreed to buy LifeStance at a $1.2 billion value, providing a full equity backstop, the national provider of behavioral health services in June went public at more than five times that value.

Debuting at an initial market value of $6.7 billion, LifeStance’s current market capitalization sits north of $9 billion today. 

“With LifeStance at [almost] $10 billion, I don’t think you can say anyone is overpaying [in behavioral health],” one market source recently told PE Hub

In other brewing activity, CCMP Capital is preparing for a sale of Eating Recovery Center later this year via Moelis; however, sources in April said a process was not imminent.