Buyer: American Addiction Centers (AAC Holdings)
Sector: Behavioral Health
AAC Holdings executives on Wednesday said they will buy a New England-based addiction treatment peer that rings up more than $50 million in revenues per year. Brentwood-based AAC will pay $85 million via a combination of debt proceeds, cash, restricted stock and seller financing for AdCare Inc., which runs an inpatient hospital, a residential treatment facility and seven outpatient centers in Massachusetts and Rhode Island. The deal is expected to close in the first half of next year.
AdCare, which was founded in 1986, posts more than 6,000 hospital and residential admissions and more than 115,000 outpatient visits annually. In the 12 months ended June 30, the company posted adjusted EBITDA of $8.5 million on revenues of $51 million. AAC’s acquisition also includes 1-800-ALCOHOL, a referral phone line, and other toll-free numbers that together log about 50,000 calls per year.
Michael Cartwright, chairman and CEO of AAC, said in a statement his team’s planned deal will diversify the company’s business by payor, region and treatment type and called AdCare “an ideal, strategic fit within the AAC platform.” The AAC team expects to save $2.8 million in costs in the first year of the combined organization and add more than $1 million in revenue growth at AdCare’s Rhode Island facility. AdCare Chairman and CEO David Hillis Sr. will join the AAC board at closing. The combination of the two companies will grow hospitals’ share of AAC’s revenues to 14 percent from 6 percent. It also builds out the company’s Northeast presence, which now is focused on New Jersey, and adds government reimbursement business to its revenue mix. Shares of AAC (Ticker: AAC) fell 7 percent to $11.65 during the day Wednesday but rose 3 percent after hours to $12. So far this year, the shares have climbed 60 percent.