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

AdaptHealth Holding Corp., a fast-growing, $522 million (yearly sales), Plymouth Meeting-based home medical care equipment distributor, 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 up to $353 million by Richard Barasch and his New York investment firm, Deerfield Management, 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 a Deerfield affiliate, DFB Healthcare Acquisitions Corp., which 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 around $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 the Universal American Corp., the health insurance company before he sold it to WellCare Health Partners in 2017.

Deerfield plans to invest $253 million from DFB Healthcare funds into Adapt, plus up to $100 million in a private-placement share sale. At least $50 million 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 atr 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 rise to $152 million on increased sales of $583 million next year.

Plus, Adapt has identified more firms it wants to buy, with Deerfield’s backing, 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,” Barasch said in a written statement. Sales tripled from 2016-19, 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 and backers owning the rest. Both companies’ boards have approved the deal, with approval still pending by DFB shareholders. The buyer hopes to close before the end of the year.

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