The acquisition will enhance Centric’s position as a leading Canadian provider of specialty pharmacy services to seniors communities, serving over 50,000 residents in the country.
Toronto-based Centric also announced it has entered into a binding agreement with Yorkville and Crown Capital Partners Inc that sees the two firms assist Centric in refinancing its existing credit facilities and funding the cash closing price of the transaction.
"When we invested in Centric Health in 2019, we believed in the company's strategy and management team and we committed to partnering with them to create the leading Canadian specialty pharmacy," said Ralph Desando, managing director of Yorkville.
"We are excited to support this transformative acquisition and proud to be part of the Centric growth story."
Remedy Holdings and its specialty pharmacy business serves more than 18.500 residents in long-term care, assisted living and similar institutions across Ontario and Western Canada. The group posted revenue of nearly C$60 million for its 2019 fiscal year, according to Centric.
The deal marks the start of an “exciting new chapter” for Centric, its CEO David Murphy told investors.
"We look forward to welcoming the Remedy'sRx Specialty Pharmacy team and customers,” Murphy said in a statement. “Together we can build on our respective strengths and provide a best-in-class service offering to home operators that improves health outcomes for the residents we serve.”
Under the terms of the deal, Centric entered into a share purchase agreement to acquire Remedy for up to C$44 million, $31 million of which is due on closing comprised of $8 million in cash and $23 million worth of Centric shares. An additional $8 million in deferred consideration will be split between a $4 million deferred consideration due 12 months following closing and another $4 million payable via a vendor take-back note due 18 months following closing.
The transaction also includes an earn-out consideration of up to $5 million in cash if the company meets certain performance targets over the next two years.
Bruce Moody, Remedy’s CEO, will join Centric’s board of directors along with another nominee of his choosing.
Centric has also agreed with Yorkville to refinance its loan worth C$12 million, it said in a release. Yorkville will advance a subordinate loan to Centric in two separate tranches, including an initial $6 million loan and a second tranche of $2 million that may be increased to $4 million at Yorkville’s option.
Yorkville launched its private-equity fund in September 2019 as part of its $32.8 million private placement into Centric.
In a separate deal, Crown Capital will advance credit facilities to Centric of up to C$30 million in three tranches, starting with a $22 million facility and followed by a separate tranche of $5 million. A third tranche of $3 million will come upon Centric reaching certain financial milestones, the company said.
The Crown Capital facilities will be used to repay outstanding debt facilities and fund the closing cash purchase price of the transaction. Crown Capital will receive 7.2 million Centric warrants priced at C$0.25 for a five-year period.
The deal is expected to close in the second quarter of 2020, subject to regulatory and shareholder approval.
Shares of Centric were up 26.1% in Tuesday afternoon trading at C$0.145.
--Updated with share price--
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