- Tested market twice before, via Raymond James, Jefferies
- Palladium to fetch >4.5x return
- Home-health firm scores 9.5x to 10.5x Ebitda multiple
Blue Wolf Capital Partners and Kelso & Co have joined forces to recapitalize Palladium Equity Partners’ Jordan Health Services in a deal valued around $700 million, according to people with knowledge of the situation.
The deal marks the end of a saga for Palladium. The middle-market PE shop enlisted Houlihan Lokey last summer for a third try at a sale of the Addison, Texas, home-health and hospice-services company.
It’s also not the first time that talks have been held between Jordan and Blue Wolf, the latter of which already owns National Home Health and Great Lakes Caring.
Turnaround-focused Blue Wolf nearly sealed a deal for Jordan in 2016 following a Raymond James & Associates-conducted auction, as Buyouts previously reported. Palladium pulled the deal in the final hours of negotiations, sources said.
The parties’ connections have since extended further. After the 2016 deal came undone, Scott Herman stepped down as Jordan’s CEO in July 2017 and a month later took on the CEO post at Blue Wolf’s National Home Health.
New York’s Kelso, for its part, typically invests in North American mid-market companies valued at up to $1.5 billion.
Waiting seems to have paid off for Palladium, which purchased Jordan out of its third pool, a 2005 vintage fund that collected $775 million. The sponsor is poised to generate a more than 4.5x return on invested capital through the sale of Jordan, one of the people said.
Palladium initially injected $71 million in Jordan in December 2010, and the firm has since received proceeds from a one-time dividend, this person said. Jordan has some $271 million in debt, the person added.
The about $700 million valuation equates to a 9.5x to 10.5x multiple of Ebitda of around $70 million, the people said.
That tops where bids came in last time around. In the Raymond James auction, which ran from late 2015 through early 2016, Jordan fielded bids from PE shops in the 8x to 8.5x Ebitda range, sources previously said.
A less-robust process was conducted by Jefferies about 18 months ahead of the Raymond James-run auction. The Wall Street Journal said that process was expected to produce a valuation in the $300 million to $400 million range.
Despite a perceived level of uncertainty following Palladium’s past attempts to sell the company, Jordan in the time since has continued to bulk up and reposition itself through its own M&A efforts
Perhaps more important than scale, a slew of add-on purchases have bolstered Jordan’s hospice-care and skilled medical-home-health services.
These services rely more on Medicare reimbursement, as opposed to Medicaid-reliant, non-skilled home-health services, the latter referring to non-medical care such as companion services.
Medicaid-dependent sectors are viewed as more vulnerable to any potential changes to Obamacare, or the Affordable Care Act.
Other participants in the latest Houlihan Lokey-run process were American Securities and Goldman Sachs, two of the people said.
A successful outcome for Jordan comes after more than one home-health sales process was shelved in the past six months.
That includes Premier Home Health Care Services, whose JP Morgan Securities-run sales process was withdrawn last fall amid expectations the White Plains, New York, company was poised to miss its 2017 earnings projections, Buyouts reported in October.
Oak Hill Capital Partners’ AccentCare was also on the block last year via Harris Williams and JP Morgan.
The other PE-backed asset of scale is One Equity Partners’ recently-rebranded platform Simplura Health Group. The Northeast-focused company, formerly known as All Metro Health Care, in February made its fourth add-on, scooping up SarahCare.
In other home-health activity, shareholders of industry giant Kindred Healthcare on Thursday approved its $4.1 billion leveraged buyout by TPG Capital, Welsh, Carson, Anderson & Stowe and Humana.
Representatives of Palladium, Kelso, Blue Wolf and Houlihan Lokey declined to comment, while those with American Securities and Goldman didn’t immediately respond to requests for comment.
Update: This story has been updated to include a decline to comment from Kelso.
Action Item: Reach Blue Wolf Managing Partner Adam Blumenthal at firstname.lastname@example.org
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