Healthcare Merger Corporation

Healthcare Merger Corporation

Oct 19, 2020 by viktoria.v

PROPOSED BUSINESS COMBINATION: SOC Telemed


ESTIMATED CURRENT FUNDS in TRUST: $251.8 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.07*
ENTERPRISE VALUE: $721 million

*SPACInsider estimate a/o 10-17-20

Healthcare Merger Corp. proposes to combine with SOC Telemed with an initial enterprise value of approximately $720 million. SOC is a leading provider of acute telemedicine solutions that are used primarily inside hospitals alongside onsite care teams to provide time-sensitive specialty care when patients are their most vulnerable. SOC provides a differentiated solution through the integration of three critical elements, (i) a proven software platform, (ii) a panel of consult coordination experts, and (iii) a network of clinical specialists, all three of which are combined into a seamless, acute telemedicine solution. SOC provides services to 847 facilities including 543 acute care hospitals in 47 states, including 19 of the 25 largest U.S. health systems. SOC is the largest provider of acute teleNeurology and telePsychiatry, and has delivered over one million acute care consultations.

TRANSACTION

Institutional Investors, including funds and accounts managed by BlackRock Inc., Baron Capital Group, and ClearBridge Investments, among others, have committed to a private investment of $165 million in common stock of the combined company that will close concurrently with the business combination. In addition, HCMC currently holds approximately $250 million in its trust account.

SOC’s current management and equity holders, including Warburg Pincus, will roll a portion of their equity into SOC, and the proceeds generated by the transaction will be used to pay down existing debt, purchase a portion of the equity owned by existing SOC shareholders, and capitalize the SOC Telemed balance sheet.

Assuming no redemptions of HCMC public shares, current SOC equity holders will own 40%, HCMC shareholders will own 32%, PIPE investors will own 21%, and HCMC’s sponsor will own 7% of the issued and outstanding shares of common stock of SOC immediately following the closing, respectively.

Futhermore, the Sponsors will surrender up to 1,875,000 shares of Parent’s Class B common stock, determined based on a sliding scale of Parent’s available cash at the closing of the transactions between $250,000,000 and $285,000,000, which are subject to potential forfeiture if certain post-closing share price targets are not satisfied prior to the seventh (7th) anniversary of the closing.

There is a condition to closing of having at least $250,000,000 in available cash (including proceeds in connection with the Private Placement and the funds in Parent’s trust account) immediately prior to the effective time of the consummation of the Mergers with an Outside Date of January 29, 2021.

The proposed business combination is expected to be completed in the fourth quarter of 2020.

HCCO Transaction summary


PIPE

  • Investors including BlackRock Inc., Baron Capital Group, and ClearBridge Investments have agreed to purchase an aggregate of 16,500,000 shares of Parent Class A common stock in a private placement for $10.00 per share (the “Private Placement”).
  • The proceeds from the Private Placement will be used to partially fund the cash consideration to be paid to the stockholders of the Company at the closing of the transactions contemplated by the Merger Agreement and for general working capital purposes following the closing.

SPONSOR AGREEMENT

(6,250,000 Founder Shares held at IPO)

Sponsor has agreed to:

  • Waive certain anti-dilution rights set forth in Section 4.3(b)(ii) of Parent’s Charter that may result from the transactions contemplated by the Merger Agreement,
  • Surrender to Parent, immediately prior to the consummation of the Mergers and for no consideration, up to 1,875,000 shares of Parent’s Class B common stock, determined based on a sliding scale of Parent’s available cash at the closing of the transactions between $250,000,000 and $285,000,000,
  • Potential forfeiture of the above 1,875,000 shares of Parent Class A common stock, if certain post-closing share price targets are not satisfied prior to the seventh (7th) anniversary of the closing
    • 50% if the Common Share Price is greater than $12.50 after the Closing Date
    • 50% if the Common Share Price is greater than $15.00 after the Closing Date

NOTABLE CONDITIONS TO CLOSING

  • Parent having at least $250,000,000 in available cash (including proceeds in connection with the Private Placement and the funds in Parent’s trust account) immediately prior to the effective time of the consummation of the Mergers (after taking into account:
    • Payments required to satisfy Parent’s stockholder redemptions and
    • Parent’s transaction costs

NOTABLE CONDITIONS TO TERMINATION

  • By either Parent or the Company, if the consummation of the Mergers has not occurred on or prior to January 29, 2021 (the “Outside Date”).

ADVISORS

  • Credit Suisse served as financial advisor to SOC and acted as placement agent on the private offering.
  • Orrick Herrington & Sutcliffe LLP served as legal counsel to SOC.
  • MTS Health Partners, L.P. served as financial advisor to HCMC
  • Weil, Gotshal & Manges LLP and Ellenoff Grossman & Schole LLP served as legal counsel to HCMC.
  • Cantor Fitzgerald & Co. served as capital markets advisor to HCMC.

HEALTHCARE MERGER CORP. MANAGEMENT & BOARD


Executive Officers

Steven J. Shulman, 68
Chief Executive Officer & Director

Mr. Shulman has over 45 years of experience leading and acquiring businesses in the healthcare industry. Mr Shulman is currently the Chairman of Magellan where he previously served as Chief Executive Officer from 2002 to 2008 and spearheaded its turnaround and restructuring following bankruptcy. Magellan is now a leader in managing what we believe are among the fastest growing, most complex areas of health, including special populations and other specific areas of healthcare. Mr. Shulman also currently serves as Chairman of Quartet Health, Inc., a healthcare technology company which connects primary care and mental health providers, a position he has held since 2014, CareCentrix, Inc., a post-acute managed care company, a position he has held since 2008 and Co-Chairman of Healthmap Solutions Inc., a health management company focused on progressive diseases, since 2018. He is also the Managing Partner at Shulman Family Ventures, Inc., a healthcare-focused private equity firm, a position he has held since 2008. In the last five years, he has served as a Director of several other privately-held companies, including VillageMD, a primary care medical management company, MedImpact, the largest privately held prescription drug benefits management company, Healthmarkets, a healthcare distribution and specialty insurance company, Pager, a digital health company and Facet Technologies, an OEM of lancets and lancing devices for diabetics. Previously, from 2013 to 2018, Mr. Shulman served as Chairman of the Board of R1 RCM Inc., a technology-enabled revenue cycle management service for healthcare providers and from 2013 to 2014 as Chairman of Health Management Associates, Inc., an independent national research and consulting firm in the healthcare industry. He served as an Operating Partner at Water Street Healthcare Partners, LLC from 2008 until 2015 and Tower Three Partners LLC from 2008 until 2013. He also served as Chairman and Chief Executive Officer of Internet Healthcare Group, LLC from 2000 to 2002 and as Chairman, President and Chief Executive Officer of Prudential Healthcare, Inc. from 1997 to 1999. Prior to that, Mr. Shulman served in senior executive positions at Value Health, Inc., a specialty managed care company he founded and took public, including as a Director and as President of the Pharmacy and Disease Management Group. He also previously held senior executive positions at each of Cigna Corporation, including as President of the East Central Division, and Kaiser Permanente, an integrated managed-care company, including as Director, Medical Economics. He received his Bachelor’s degree in Economics and Master’s degree in Health Services Administration from the State University of New York at Stony Brook.


Charles J. Ditkoff, 57
President & Director Nominee

Since 2017, Mr. Ditkoff has served as Senior Advisor to MTS, where he advises healthcare clients on all aspects of major corporate transactions, including mergers, acquisitions, divestitures and going-private transactions as well as regulatory, reimbursement and operational issues. Since 2016, Mr. Ditkoff has also been a Senior Advisor at FTI Consulting, Inc. where he drives relationships with healthcare organizations and private equity firms, and since 2017 he has been Senior Advisor to Ares Management Corporation, and since 2012, Mr. Ditkoff has also served as Senior Advisor at The Marwood Group, a healthcare-focused advisory and consulting firm. He also currently serves as counsel at McDermott, Will & Emery, a position he has held since 2012. In addition, since 2013, Mr. Ditkoff has been a director of Cumberland Consulting Group, LLC, a healthcare consulting and services firm providing strategic advisory consulting services, IT professional services, outsourced managed services and analytics solutions to clients in the payer, provider and life sciences markets. Previously, from 2010 to 2012, Mr. Ditkoff was Vice Chairman and Head of Global Healthcare Corporate and Investment Banking at Bank of America Merrill Lynch. Previously, he worked at Morgan Stanley and Credit Suisse. Prior to that, he was an Associate at Cravath, Swaine and Moore where he practiced corporate securities law. He holds a B.A. degree from Brown University and a J.D. degree from Yale Law School.


Dennis M. Conroy, 48
Chief Financial Officer

Mr. Conroy has over 20 years of financial experience. Since 2013, Mr. Conroy has served as Chief Financial Officer for MTS Health Partners, LP, and since 2016 as Chief Operating Officer. Before MTS, he served as Senior Vice President of Finance at Rice Financial Products Company, a public finance focused investment bank, from 2008 to 2013. Prior to that, from 1998 to 2008, Mr. Conroy held a variety of roles at Gilman Ciocia, Inc., a provider of federal, state, and local tax preparation and financial planning services, including Chief Accounting Officer and Chief Financial Officer of its brokerage division. Mr. Conroy holds an M.B.A from The Lublin School of Business at Pace University and a B.S. in accounting from the State University of New York.


 

Board of Directors

James C. Cowles, 64
Director Nominee

Until his retirement in December 2018, Mr. Cowles was the Chief Executive Officer for Europe, Middle East & Africa (EMEA) at Citigroup, Inc. (NYSE:C), a position he had held since 2013. Prior to assuming this position, Mr. Cowles had served as Chief Operating Officer for EMEA and Head of Western Europe at Citigroup. He had also served as Head of Markets for Citi in EMEA, Global Head of Equities and Global Head of Equity Capital Markets (new-issue product). Mr. Cowles joined Smith Barney in 1979, which eventually became part of Citigroup as a result of several transactions. Other roles he held during his career have included: Head of Equities (EMEA), Deputy Head of Investment Banking, Head of Real Estate Investment Banking and Commercial Mortgage Trading, Head of Debt Capital Markets and Head of Direct Investments. Since 2019, he has served on the board of the following private companies: Kroptek, an agricultural technology company; Finconecta, a fintech platform seeking to integrate different components of the financial system; and Shieldpay, an online secure payments and escrow services provider. Mr. Cowles graduated Phi Beta Kappa from Denison University with a B.A. in economics, and holds an M.B.A. from The Wharton School, University of Pennsylvania.


David H. Glaser, 65
Director Nominee

Until his retirement in 2019, Mr. Glaser was Chief Operating Officer of Bank of America Merrill Lynch’s Global Corporate and Investment Bank (“GCIB”), which encompasses investment banking, capital markets, large cap corporate lending, treasury services and leasing activities, a position he had held since 2010. Mr. Glaser was Chairman of the GCIB Fairness Opinion Committee and a member of the GCIB Operating Committee. Prior to being Chief Operating Officer, he was Global Deputy Head of GCIB’s Mergers & Acquisitions Group and Chairman of Bank of America Securities Mergers and Acquisitions Group. Prior to joining Bank of America Securities in 2008, Mr. Glaser spent 23 years at Bear Stearns. During his tenure at Bear Stearns, he was at various times Co-Head of Investment Banking, Co-Head of Mergers and Acquisitions, a member of the Firm Management and Compensation Committee, Co-Chairman of the Firm Risk Committee, member of the Board of Directors of Bear Stearns & Co, Chairman of the Investment Banking Commitments Committee, a member of the Merchant Banking Investment Committee and Chairman of the Fairness Opinion Committee. Prior to joining Bear Stearns, Mr. Glaser spent three years as a mergers and acquisitions attorney at Skadden, Arps, Slate, Meagher & Flom. Mr. Glaser holds J.D. and M.B.A. degrees from the University of Chicago and an A.B. from Columbia.


Rick Matros, 65
Director Nominee

Mr. Matros has served as Chairman of the Board, President and Chief Executive Officer of Sabra Healthcare REIT, Inc. (NASDAQ: SBRA) since 2010. He was Chairman of the board of directors and Chief Executive Officer of Sun Healthcare Group, Inc. from 2001 until the transaction which created Sabra. Mr. Matros founded and served as Chief Executive Officer and President of Bright Now! Dental, a dental care provider, from 1998 to 2000 and as a director from 1998 until its sale in 2010. From 1998 until the sale of its operations in 2006, Mr. Matros was also a member of CareMeridian, LLC, a healthcare company that specialized in offering subacute and skilled nursing for patients suffering from traumatic brain injury, spinal cord injury and other catastrophic injuries, where he also served on the management committee. Previously, from 1994 to 1997, he served Regency Health Services, Inc., a publicly held long-term care operator, holding positions as Chief Executive Officer, President, director and Chief Operating Officer. Prior to that time, from 1988 to 1994, he served at Care Enterprises, Inc., holding positions as Chief Executive Officer, President, Chief Operating Officer, director and Executive Vice President—Operations. Mr. Matros has served on the executive board for RFE Investment Partners since 2009 and as the Executive Producer of Sabra Films, LLC since 2012. Mr. Matros holds a B.A. degree from Alfred University, and a M.S. in Gerontology from the University of Southern California.