Fast-growing home medical supplier AdaptHealth to raise cash, go public

AdaptHealth Holding Corp., a fast-growing, $522 million (yearly sales), home medical care equipment distributor based in Plymouth Meeting, plans to go public with backing from a new investor.

The company will be listed on the Nasdaq stock market following a planned investment of as much as $353 million by Deerfield Management, a New York investment firm, and former health-insurer CEO Richard Barasch, Barasch said in a brief interview this morning.

“We’re not changing anything about management or location,” said Barasch. Chief executive Luke McGee, president Josh Parnes, and other managers “are going to keep running everything,” with Barasch serving as the new board chairman.

Adapt, founded seven years ago as QMES Holdings LLC, employs more than 500, according to industry databases. Barasch says the company is the third-largest in the home medical equipment rental and sales industry, which is growing as hospitals, doctors, and insurers ship more equipment directly to patients in an effort to keep costs down.

The plan calls for joining Adapt to DFB Healthcare Acquisitions Corp., a special-purpose company backed by Deerfield that is already publicly traded — its share symbol will be changed from the current DBFH.

Barasch said AdaptHealth Holding will have equity and debt totaling $1 billion, and should be worth about $800 million on the stock market. Barasch says the total home-medical equipment market tops $12 billion in yearly sales and should grow faster than the economy for at least the next several years.

Barasch was chief executive of Universal American Corp., the health insurance company, before he sold it to WellCare Health Plans Inc. in 2017.

DFB Healthcare plans to invest $253 million into Adapt, plus up to $100 million in a private-placement share sale. Part of the proceeds will be used to buy out Adapt’s existing investors.

CEO McGee, a career investment banker, was also a principal at Quadrant, Adapt’s previous lead investor.

Adapt is best known as a rental and sales provider for sleep apnea and oxygen gear, wheelchairs, walkers, and hospital-style beds, making 7,000 deliveries a day to Medicare, Medicaid, and privately insured patients across the U.S., from hospitals, lung doctors, nursing homes, sleep labs, and clinics.

Services that get equipment into patients’ hands fast and cheap “should become increasingly valuable” as more people are treated at home, Barasch added.

Adapt has acquired 56 smaller firms since it was founded as QMES Holdings LLC in 2012, cutting administrative costs as it bulks up to boost profitability. The company says its earnings — not counting interest, taxes, and other financial expenses and “patient capital expenditures” for the equipment Adapt rents — totaled $130 million last year, and should grow to $152 million on increased sales of $583 million next year.

Plus, Adapt has identified more firms it wants to buy over the next year.

“Based on the current pipeline of acquisitions, the company believes it can add approximately $100 million of acquired revenue each year,” Adapt and Deerfield said in a joint statement. Sales tripled from 2016-2019, according to data the company posted.

In April, CIT Group Inc. said it agreed to lend up to $425 million to Adapt in a senior credit facility. CIT had also funded previous acquisitions by Adapt. The April funding assisted Andrew Feldstein’s BlueMountain Capital Management LLC, New York, to refinance Adapt’s previous debt and offer future funding. Adapt also raised at least $2 million from private investors in 2017.

Once the deal is done, current Adapt shareholders will own 59 percent of the company, with DFB and its affiliates, backers, and current shareholders owning the rest, minus additional share sales by DFB investors.

Both companies’ boards have approved the deal, with DFB shareholder approval still pending. The buyer hopes to close before the end of the year.