Acadia in ongoing talks with KKR, sources say
01 DEC 2018
KKR continues to work on a possible take-private of behavioral health company Acadia Healthcare [NASDAQ:ACHC], two sources familiar with the situation said.
A buyout will require a significant equity check of USD 2.5bn to USD 3bn and discussions to firm up this equity financing are ongoing, the sources said.
If a deal is reached, it may come in the next few weeks and value Acadia’s shares in the high USD 30s to low USD 40s range, they said. The stock closed Friday at USD 33.97.
Even with softening of the credit markets, the deal could see a leverage of 7x to 7.5x EBITDA, the two sources said. Acadia has estimated it may report up to USD 610m in adjusted EBITDA for 2018.
Earlier this month, Acadia shares plunged after CNBC reported that a deal to buy the Franklin, Tennessee based company did “not look particularly promising.” The NY Post subsequently reported that talks with KKR remained ongoing.
In October, Reuters reported that Acadia was talking with private equity firms about a deal, including KKR and TPG. The two sources said TPG has been pencils down. It remains possible that a suitor like TPG could get active again given where Acadia shares are currently trading, they said.
Acadia operates over 580 behavioral healthcare facilities in the US, UK and Puerto Rico, according to its website. It offers behavioral and addiction services from psychiatric hospitals to residential treatment centers and outpatient clinics.
The company has around USD 3.2bn in long term debt and a USD 3bn market cap, putting its current valuation at around 10x EBITDA.
Earlier this year, KKR took private Envision Healthcare for USD 9.9bn. Loans backing the Envision buyout have since declined in price along with other leverage loans, according to media reports, raising concerns about the strength of the leverage market.
TPG and KKR declined to comment. Acadia did not respond to requests for comment.