SOC Telemed, one of the largest national providers of acute care telemedicine, and Healthcare Merger Corp. (NASDAQ: HCCO), a special purpose acquisition company, announced today that they have entered into a definitive agreement for a business combination. The combined company will operate as SOC Telemed and will be listed on the Nasdaq. The transaction implies an initial enterprise value for SOC of approximately $720 million.
SOC is a leading provider of acute telemedicine solutions that are used primarily inside hospitals alongside onsite care teams to provide time-sensitive specialty care when patients are their most vulnerable. SOC provides a differentiated solution through the integration of three critical elements, (i) a proven software platform, (ii) a panel of consult coordination experts, and (iii) a network of clinical specialists, all three of which are combined into a seamless, acute telemedicine solution. SOC provides services to 847 facilities including 543 acute care hospitals in 47 states, including 19 of the 25 largest U.S. health systems. SOC is the largest provider of acute teleNeurology and telePsychiatry, and has delivered over one million acute care consultations.
SOC’s management team is led by Paul Ricci, Interim Chief Executive Officer, John Kalix, President, and Hai Tran, Chief Operating Officer and Chief Financial Officer. At the completion of the proposed business combination, Mr. Ricci, who is an advisor to Warburg Pincus, will step down as Interim Chief Executive Officer. Steve Shulman, the Chief Executive Officer and a director of HCMC, will become the Chairman of the SOC Telemed board of directors, and John Kalix will be appointed Chief Executive Officer. Hai Tran will continue as Chief Operating Officer and Chief Financial Officer. SOC’s existing majority equity holder, Warburg Pincus, a leading global growth equity firm, will remain SOC’s largest shareholder.
“This business combination strengthens SOC Telemed and will allow it to further penetrate the broad and fast-growing acute telemedicine market,” stated Mr. Ricci. “Telemedicine is at a pivotal moment as the country continues to navigate the COVID-19 crisis. As hospital leaders struggle with the problems of acute capacity management, physician scarcity and cost optimization, it has become clear that virtual care will continue to be a critical component of the healthcare industry’s ability to deliver better care to patients.”
“We are pleased to partner with SOC to drive its next phase of growth. SOC operates a scaled and differentiated acute care telemedicine platform,” said Mr. Shulman. “This transaction will enable the company to capitalize on substantial opportunities to expand and grow and benefit from the accelerated adoption of telemedicine as a result of COVID-19.”
TJ Carella, Managing Director at Warburg Pincus, said, “We are excited to join forces with the HCMC team and to continue our partnership with SOC in delivering value to its many customers.” Amr Kronfol, Managing Director at Warburg Pincus, added, “We are very grateful to Paul for his leadership of SOC and believe that Steve and John are well positioned to drive the company forward in this next phase of its growth.”
HCMC is a Nasdaq-listed public investment company. HCMC’s strategy is to identify and complete business combinations with unique, differentiated companies, catalyzed by access to growth capital from the public equity markets. HCMC’s management team has extensive experience acquiring and managing businesses in the healthcare industry and leverages its relationship with MTS Health Partners, L.P., a leading investment banking firm focused exclusively on the healthcare industry.
“SOC fits perfectly with HCMC’s differentiated expertise in the healthcare industry and we look forward to working together to drive growth in the public markets with increased capital and the benefit of HCMC’s relationships and experience,” said Charlie Ditkoff, President of HCMC.
Key Transaction Terms
Institutional Investors, including funds and accounts managed by BlackRock Inc., Baron Capital Group, and ClearBridge Investments, among others, have committed to a private investment of $165 million in common stock of the combined company that will close concurrently with the business combination. In addition, HCMC currently holds approximately $250 million in its trust account.
SOC’s current management and equity holders, including Warburg Pincus, will roll a portion of their equity into SOC, and the proceeds generated by the transaction will be used to pay down existing debt, purchase a portion of the equity owned by existing SOC shareholders, and capitalize the SOC Telemed balance sheet.
Assuming no redemptions of HCMC public shares, current SOC equity holders will own 40%, HCMC shareholders will own 32%, PIPE investors will own 21%, and HCMC’s sponsor will own 7% of the issued and outstanding shares of common stock of SOC immediately following the closing, respectively.
The proposed business combination is expected to be completed in the fourth quarter of 2020, subject to (i) approval by HCMC’s stockholders, (ii) the expiration of the Hart Scott Rodino Antitrust Improvements Act of 1976 waiting period and (iii) other customary closing conditions.
A more detailed description of the transaction terms and a copy of the agreement and plan of merger (the “Merger Agreement”) will be included in a current report on Form 8-K to be filed by HCMC with the United States Securities and Exchange Commission (“SEC”). HCMC will file a registration statement (which will contain a joint proxy statement/consent solicitation statement/prospectus) with the SEC in connection with the transaction.
Credit Suisse served as financial advisor to SOC and acted as placement agent on the private offering. Orrick Herrington & Sutcliffe LLP served as legal counsel to SOC. MTS Health Partners, L.P. served as financial advisor and Weil, Gotshal & Manges LLP and Ellenoff Grossman & Schole LLP served as legal counsel to HCMC. Cantor Fitzgerald & Co. served as capital markets advisor to HCMC.
A presentation made by the management of SOC and HCMC regarding the transaction will be available on SOC’s website (www.soctelemed.com/press-room). In connection with this event, HCMC will file an investor presentation with the SEC which can be viewed at www.sec.gov.
Specialists On Call, Inc. (d/b/a SOC Telemed) (SOC) is the largest national provider of telemedicine technology and solutions to hospitals, health systems, post-acute providers, physician networks, and value-based care organizations. Built on proven and scalable infrastructure as an enterprise-wide solution, SOC’s technology platform, Telemed IQ, rapidly deploys and seamlessly optimizes telemedicine programs across the continuum of care. SOC provides a supportive and dedicated partner presence, virtually delivering patient care through teleNeurology, telePsychiatry and teleICU as well as enabling healthcare organizations to build sustainable telemedicine programs in any clinical specialty. SOC enables organizations to enrich their care models and touch more lives by supplying healthcare teams with industry-leading solutions that drive improved clinical care, patient outcomes, and organizational health. SOC was the first provider of acute clinical telemedicine services to earn The Joint Commission’s Gold Seal of Approval and has maintained that accreditation every year since inception. SOC is backed by Warburg Pincus. For more information, visit www.soctelemed.com.
Healthcare Merger Corp. (HCMC) is a public investment vehicle formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. HCMC’s securities are traded on the NASDAQ under ticker symbols HCCO, HCCOU, and HCCOW. HCMC raised $250 million of cash proceeds in an initial public offering in December 2019. HCMC is led by Chief Executive Officer Steve Shulman, President Charlie Ditkoff and Chief Financial Officer Dennis M. Conroy and is principally sponsored by Shulman Ventures LLC and MTS Health Partners, LP.
About Warburg Pincus
Warburg Pincus LLC is a leading global private equity firm focused on growth investing. The firm has more than $53 billion in private equity assets under management. The firm’s active portfolio of more than 185 companies is highly diversified by stage, sector, and geography. Warburg Pincus is an experienced partner to management teams seeking to build durable companies with sustainable value. Founded in 1966, Warburg Pincus has raised 19 private equity funds, which have invested more than $84 billion in over 900 companies in more than 40 countries. The firm is headquartered in New York with offices in Amsterdam, Beijing, Berlin, Hong Kong, Houston, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo, Shanghai, and Singapore. For more information please visit www.warburgpincus.com.