Federal Street Acquisition Corp., a special purpose acquisition company sponsored by an affiliate of Thomas H. Lee Partners, L.P., and the holding company of Universal Hospital Services, Inc., a leading, nationwide provider of healthcare technology management and service solutions and a portfolio company of Irving Place Capital Management, L.P., today announced that they have entered into a definitive merger agreement.
Under the terms of the agreement, FSAC and UHS will combine under a new holding company to be named Agiliti, Inc. (“Agiliti”), which intends to apply to have its common stock and warrants listed on the Nasdaq Stock Market under the ticker symbols “AGTI” and “AGTIW,” respectively. The purchase price for the acquisition implies an initial enterprise value for the combined company of approximately $1.74 billion, or 11.6x UHS’s forecasted 2018 Adjusted EBITDA of approximately $150 million and 10.2x UHS’s forecasted 2019 Adjusted EBITDA of approximately $170 million, in each case, based on the higher end of UHS’s forecasted Adjusted EBITDA range.
“We have long admired Tom Leonard and the incredible team at UHS and could not be more excited to partner with them as the Company enters an exciting, new chapter with a new name – Agiliti – which is emblematic of their everyday approach,” said Scott Sperling, Executive Chairman of FSAC and Co-President of THL. “UHS’s strong competitive position, broad range of high-value capabilities, and strong business model, make this a highly attractive investment opportunity for FSAC and THL. We look forward to contributing our operational and strategic expertise as the combined company builds on its proven platform, executes on its compelling growth objectives, and continues to deliver to its customers the industry’s best healthcare technology management and service solutions.”
“For nearly 80 years, UHS has provided market-leading equipment management services to the U.S. healthcare industry,” said Tom Leonard, Chief Executive Officer of UHS. “Throughout the Company’s evolution, our goal has always been to help customers manage the complexities of owning and maintaining medical equipment, so that caregivers have more time to focus on patients. Today, we serve more than 7,000 healthcare providers nationwide with an end-to-end solution called ‘Equipment Value Management’ that helps customers address important clinical, operational and financial objectives. The Company is well positioned in the market with strong momentum for continued value creation, and we are pleased to have the opportunity to advance our business as Agiliti, alongside our new partners at FSAC and THL.”
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Upon consummation of the transaction, Tom Leonard will continue leading the Company as Chief Executive Officer, along with his current management team, including Jim Pekarek, Chief Financial Officer, Kevin Ketzel, President, and Bettyann Bird, Senior Vice President of Marketing and Commercial Solutions.
IPC, UHS’s current private equity sponsor and majority owner, will retain a minority equity stake in the combined company.
John Howard, Co-Managing Partner of IPC said, “We are extremely proud of what UHS has accomplished since we acquired the business. The results we have achieved demonstrate the unique value UHS brings to its healthcare customers. This transaction will enable the Company to accelerate its existing growth initiatives and further maximize its market position under the leadership of a world-class management team. We look forward to the ongoing success of Agiliti as a public company.”
Transaction Summary
Along with the $460 million of cash held in a trust account raised from its initial public offering in July 2017, FSAC has secured commitments for a $250 million common stock private placement from institutional investors at a price of $10.00 per share. The private placement includes a $200 million investment by a newly formed entity that will be owned by FSAC’s sponsor entity, FS Sponsor, LLC (“FS Sponsor”), and certain investment funds affiliated with THL. Assuming no redemptions by FSAC’s public stockholders, this entity will own approximately 30% of Agiliti’s outstanding common stock following the merger and private placement, including FS Sponsor’s existing founder shares and the shares purchased in the private placement. IPC and the other former stockholders of UHS will retain an ownership interest of approximately 22% and the current public stockholders of FSAC will own approximately 43% of Agiliti’s outstanding common stock, in each case, assuming no redemptions by FSAC’s public stockholders. FSAC’s existing warrants will become warrants to purchase Agiliti common stock in accordance with their terms.
FSAC has entered into a debt commitment agreement with certain lenders, pursuant to which the lenders have committed to make available to Agiliti a term loan of $660 million, the proceeds of which will be used to repay existing UHS indebtedness. It is currently anticipated that UHS will issue a notice of redemption with respect to its outstanding second lien notes immediately prior to the merger and that these notes would be redeemed approximately 30 days following the closing date. The lenders have also committed to provide a $150 million revolving credit facility.
The boards of directors of UHS and FSAC have unanimously approved the proposed transaction. Completion of the transaction, which is expected to occur in the fourth quarter of 2018, is subject to customary and other closing conditions, including regulatory approvals and FSAC stockholder approval. In addition to having the right to vote on the transactions, FSAC’s current public stockholders have the right to elect to have FSAC redeem their shares for cash in connection with the consummation of the transaction. The transaction is also conditioned upon there being sufficient cash, after giving effect to any redemptions, to pay the cash portion of the merger consideration, repay existing indebtedness and make other required cash payments at closing. More information on these conditions will be contained in the preliminary proxy statement that FSAC intends to file with the Securities and Exchange Commission.
As part of the transaction, Agiliti will also enter into a tax receivable agreement with the equity holders of UHS, which will provide for the sharing of tax benefits relating to certain pre-business combination tax attributes and tax attributes relating to the transaction as those tax benefits are realized by Agiliti.
Conference Call Information
UHS and FSAC will host a presentation to discuss the transaction beginning at 9 a.m. Eastern Time on Monday, August 13. Those who wish to view the presentation may access it here, or by visiting www.uhs.com/investors and selecting the “Presentations” tab. An audio form of the presentation will be available toll-free at 1-877-523-5612 using Conference ID 13682526.
The presentation will be available from 9 a.m. Eastern Time on August 13, 2018, to 11:59 pm Eastern Time on October 31, 2018, using the access information above.
Advisors
J.P. Morgan Securities LLC acted as financial advisor and Weil, Gotshal & Manges LLP acted as legal counsel to UHS. Citigroup Global Markets Inc. acted as financial advisor, capital markets advisor and placement agent and Kirkland & Ellis LLP acted as legal counsel to FSAC. BofA Merrill Lynch acted as capital markets advisor and placement agent in connection with the private placement. Debt financing will be provided by JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., and KeyBanc Capital Markets Inc.
Date: August 20, 2018
Source: Businesswire