Former TIO Networks Corp. CEO Hamed Shahbazi in TIO's Vancouver office in 2015.Ben Nelms/The Globe and Mail
Well Health Technologies Corp. accelerated its acquisition spree on the weekend as it said it would buy fellow Vancouver health-services company CRH Medical Corp. for US$292.7-million.
The company said the deal would be largely financed by a concurrent $295.5-million private placement led by Hong Kong billionaire Li Ka-shing with support from unnamed institutional investors. Well added that it would also use some of its cash pile and a line of credit from Canadian Imperial Bank of Commerce and HSBC Holdings PLC. Including debt, the total value of the deal would be US$369.2-million.
Led by former TIO Networks Corp. founder Hamed Shahbazi, Well has amassed a group of 27 health clinics in British Columbia, Quebec and California while building out a network of “allied health” clinics that provides physiotherapy, sleep and other services. It offers digital clinical tools, too, that the company says serves more than 2,200 clinics in Canada and the United States.
In recent months, it’s also launched an app marketplace for clinic owners and bought a controlling stake in a U.S. telehealth company, deepening its connections to the North American health-clinic market as the COVID-19 pandemic brings increased attention to health-technology companies.
The proposed deal, which requires approval from CRH’s shareholders, would be the biggest in Well’s history. CRH is headquartered in Vancouver, but collects most of its revenue in the United States, where it provides anesthesia services for patients who receive endoscopic procedures at 70 surgical centres and clinics in 14 states, and offers a proprietary hemorrhoid treatment system.
Mr. Shahbazi said buying CRH would significantly boost Well’s free cash flow while expanding the network of health care practitioners it works with by 3,000. ”It gives us deep access to the U.S. health care system,” he said in an interview. “... It gives us so much more horsepower.”
The company said that buying CRH could boost its revenue by as much as 120 per cent on a per-share basis in 2021. Mr. Shahbazi said Well has closed eight deals, most of them much smaller than CRH, since last year’s fourth quarter began. That includes completing the acquisition of clinical software company Insig Corp., and the purchase of a 51-per-cent majority stake in Easy Allied Health Inc., a group of physical-therapy clinics in B.C.’s Lower Mainland.
Canadian health-services companies have attracted significant investment since the first wave of COVID-19 lockdowns began 11 months ago. Shares of digital mental-health therapy company MindBeacon Holdings Inc. soared when the company listed on the Toronto Stock Exchange in December, closing up 39 per cent on its opening day. Loblaw Cos. Ltd. invested $75-million in Toronto telemedicine provider Maple Corp. last fall, while Sun Life Financial Inc. took a minority stake in Montreal telemedicine company Dialogue Technologies last summer as part of a $43-million investment round.
Well’s acquisition-focused growth strategy, combined with pandemic-driven investor interest in health-technology companies, has helped transform it from a relatively unknown company even a year ago into one of Canada’s fastest-growing public technology companies.
Well’s Toronto-listed shares closed at $8.01 each on Friday, up 326 per cent from a year earlier and giving it a market capitalization of $1.3-billion. The private placement led by Mr. Li valued Well’s Toronto-listed shares at $9.80, a 25-per-cent premium to its volume-weighted average trading price of the past five trading days.
Canaccord Genuity analyst Doug Taylor has a $9 price target and a “speculative buy” rating for Well. “It continues to demonstrate its ability to use capital markets and M&A to accretively consolidate within the Canadian (and increasingly U.S.) hybrid health space,” Mr. Taylor said in a research note last November, when Well released its most recent quarterly financial results.
Mr. Shahbazi declined to name the institutional investors that backed the private placement with Mr. Li, but said that Mr. Li contributed $100-million, about a third of the total value.
The acquisition would value CRH at US$4 a share. Mr. Shahbazi said he believes that COVID-19 put downward pressure on CRH’s price, as the pandemic has for other companies: Its New York-listed shares closed on Friday at US$2.18, down from US$4.35 a year ago.
Tushar Ramani, CRH’s chief executive officer and chair, was not available for an interview, but Well said in a press release that he would lead CRH as an autonomous business unit. In an e-mailed statement, Torys LLP partner Janan Paskaran said the law firm had advised Well in the acquisition.
Well said the acquisition would help it seed digital offerings such as telehealth services and workflow optimization software into the gastroenterology sector. It also said it would launch a new digital app to help patients and health care providers learn more about colorectal and gastrointestinal issues and suggest potential treatments.
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Josh O’Kane