Owens & Minor (NASDAQ: OMI) announced it has entered into a definitive agreement to purchase Rotech Healthcare for $1.36 billion in cash. According to the the press release, the anticipated tax benefits from the transaction are about $40 million, implying a net purchase price is $1.32 billion, which represents a 6.3x multiple of LTM EBITDA. These figures imply EBITDA of $209.5m, or 6.5x the gross purchase price. Prior press reporting pegged EBITDA a touch higher at $220m, with equipment related capex at $100m.
HME / DME EBITDA Multiples
The deal represents the lowest reported multiple in our database for a larger home medical equipment asset (deal value over $200m). While we've heard that Rotech has historically has been viewed as a lower quality asset, our impression is that has changed over recent years. The low end multiple may be more reflective of reduced investor demand in the segment, as the publicly-traded DME providers (OMI, APRA, QIPT, and VMD) have all seen their stock prices decline significantly over the past few years due to a combination of the bursting of the COVID bubble / rising rates and fears over the long-term impact of GLP-1s in the space.
Other Healthcare Distribution and Equipment Services Deals
Read Scope Research's take on other healthcare distribution and equipment services M&A transactions:
About Scope Research
The Scope Research Healthcare M&A Valuation Database currently has financial details for 56 home medical equipment (HME / DME) deals going back to 2010, 38 of which include reported EBITDA multiples. The home medical equipment data can be purchased individually, while our affordable annual subscriptions provide access to all of our healthcare M&A databases and segments, updated continuously.
Don't hesitate to reach out to Will Hamilton at will@scoperesearch.co with questions about your specific situation.