AAC Holdings, Inc. (NYSE: AAC), operator of American Addiction Centers, announced its first acquisition of 2017. The company is ramping up again after a hot streak in 2015, when it acquired seven companies for a combined $143 million. Since then, the once-serial acquirer has been quiet on the M&A front as it integrated all its new businesses. It resurfaced briefly in April 2016, when it purchased a sober living facility in Texas for $5 million.
Then, on September 13, AAC announced its biggest deal to date. The target, AdCare, Inc., provides addiction treatment in New England. It operates a 114-bed hospital for substance abuse treatment and five outpatient centers in Massachusetts, as well as a 52-bed (46 currently licensed) residential treatment center and two outpatient centers in Rhode Island.
AAC paid $85 million for AdCare, its affiliates and associated real estate assets. The deal will be financed through a combination of proceeds from the issuance of an incremental term loan under AAC’s senior secured loan facility, cash on hand, seller financing and $5 million of restricted shares of AAC common stock.
The price works out to $531,250 per bed, and produces revenue and EBITDA multiples of 1.7x and 10.0x respectively. AdCare’s revenues during this period were approximately 59% related to Medicare reimbursement, 22% from in-network contracts and 19% from Medicaid reimbursement.
Through this acquisition, AAC accelerates its plan to diversify into government pay, leverage an existing outpatient and business development presence in New England and continue the expansion of its hospital strategy.
