Palladium to try to sell Jordan Health for the third time

Having nearly sealed a deal a year ago to sell Jordan Health Services, Palladium Equity Partners is gearing up to take the home-care and hospice provider back to market for a third time, Buyouts has learned.

The firm has not selected a financial adviser to conduct a sales process for the Texas company, but it’s expected to interview a small number of investment banks in Q3, three sources familiar with the matter said. A timeline is not set in stone: A formal process is likely to launch in Q1 2018 but could come sooner, sources said.

Jordan has been an aggressive buyer this year, so the timing of a process largely depends on the performance of recent add-ons, one source said. Jordan announced five deals in November 2016 alone, adding more than 4,000 patients and 1,000 employees combined.

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 said. EBITDA in 2016 was closer to $50 million, sources said.

The anticipated auction for Jordan ought to command a multiple of 8x to 9x EBITDA, with a 10x multiple of EBITDA at most, sources estimated.

Perhaps more important than scale, the acquisitions have grown Jordan’s hospice-care and skilled medical-home-health services. These services rely more on Medicare reimbursement, as opposed to Medicaid-reliant nonskilled home-health services, the latter referring to nonmedical care such as companion services. Medicaid-dependent sectors are viewed as the most vulnerable to any potential changes to Obamacare, or the Affordable Care Act.

Today Jordan’s payer mix is probably split 50-50 to 60-40 between Medicare and Medicaid recipients, respectively, as opposed to 40 percent Medicare and 60 percent Medicaid the last time it was on the auction block, sources said.

Jordan is likely to find a buyer in a sponsor seeking a platform of scale, as interest from top-tier PE groups in consolidating the sector has recently grown, sources said. The process is unlikely to produce a deal with a strategic or existing PE-backed platform, sources said.

Past attempts

Palladium previously turned to Raymond James & Associates for financial advice.

In a process that ran from late 2015 through early 2016, the PE firm fielded bids from private equity groups in the 8x-to-8.5x EBITDA range, one source said. An agreement was nearly sealed with turnaround-focused Blue Wolf Capital, but Palladium pulled the deal in its final hours of negotiations, sources said.

A less-robust process was conducted by Jefferies about 18 months ahead of the Raymond James-run auction, sources said. Palladium’s decision to explore a potential sale was likely the result of unsolicited inbound buyer interest, one of the sources said.

Palladium in late 2014 called off the sales process after receiving low bids, Buyouts reported at the time. The Wall Street Journal reported in early 2014 that the Jefferies-run process was expected to fetch a valuation in the ballpark of $300 million to $400 million.

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

Founded in 1975 in Mt. Vernon, Texas, the company today employs more than 18,000 and serves north of 33,000 patients across Texas, Oklahoma, Louisiana and Texarkana, Arkansas.

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

Palladium declined comment. Justin Miller, Jordan’s director of business development, didn’t immediately return a call.

Palladium Chairman and CEO Marcos Rodriguez and Managing Director Daniel Ilundain both are listed as current board members at Jordan.

Action Item: Reach Palladium’s Daniel Ilundain:

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