Palladium taps Houlihan Lokey for third Jordan Health auction

Palladium Equity Partners hired Houlihan Lokey to run what will represent its third sales process for Jordan Health Services, Buyouts has learned.

Middle-market-focused Palladium nearly sold the home-care and hospice-services company in 2016 to turnaround-focused Blue Wolf Capital, following an auction conducted by Raymond James & Associates, Buyouts previously reported.

Palladium turned to Jefferies in an earlier process, but a sale of the Addison, Texas, company was called off after lower-than-desired bids came through, sources said in late 2014.

Palladium’s investment dates to December 2010, when it purchased Jordan out of its third pool, a 2005 vintage fund that collected $775 million.

Buyouts reported in June that the firm was poised to interview investment banks in Q3, with plans to launch a formal process in Q1 2018 or earlier.

The anticipated process for Jordan Health comes as another private equity-backed peer gears up for a sale. Oak Hill Partners has tapped JP Morgan Securities and Harris Williams to run an auction for AccentCare, Buyouts reported last week. Oak Hill also scooped up AccentCare in 2010, moving quickly to merge it with FFL Partners Guardian Home Health.

Another senior-home-care services provider, Premier Home Health, continues to seek a buyer via JP Morgan. First-round bids for Arthur Schwabe’s New York-focused company came in at around 7x to 8x, Buyouts has reported.

Inclusive of the more than $100 million of revenue acquired over the past year or so, Palladium is projecting Jordan will generate as much as $65 million to $70 million of adjusted EBITDA in 2017, two sources previously said. EBITDA in 2016 was closer to $50 million, they said.

The extent to which a process could be affected by the firm’s past attempts to sell the company isn’t the only factor that remains uncertain.

Jordan through its own aggressive add-on acquisition efforts has bulked up its hospice-care services and skilled medical-home-health services over the past year.

These services rely more on Medicare reimbursement, as opposed to Medicaid-reliant non-skilled home-health services, the latter referring to nonmedical care such as companion services.

A payer mix increasingly reliant on Medicare recipients was considered a positive move for Jordan, as Medicaid-dependent providers are viewed as the most at-risk to potential changes to Obamacare, or the Affordable Care Act.

But a proposed rule earlier this summer by the Centers for Medicare & Medicaid Services has added a new element of uncertainty.

Among other things, the federal agency is proposing that Medicare pay for up to 30 days of home-health services for a unit of care, replacing the current 60-day episode-of-care payment model.

CMS has estimated this could cut Medicare payments for home-health providers by $950 million in 2019.

Scott Herman has led Jordan as CEO since 2013. Recent shuffling in the C-suite includes the COO appointment of former Healthesystems and DaVita Healthcare Partners executive Chris Rucker in September 2016.

Representatives of Palladium Equity and Houlihan Lokey declined comment.

Action Item: Reach Palladium’s Daniel Ilundain: dilundain@palladiumequity.com

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