WELL Health Technologies Corp.
(WELL-T) C$8.63
Closes Upsized $300+ Million Subscription Receipt Offering Event
WELL Health closed an upsized $302.5 million subscription receipt offering that was announced last week in conjunction with the pending acquisition of CRH Medical.
Impact: SLIGHTLY POSITIVE
Upsized financing accounts for ~80% of the purchase price. WELL closed a subscription receipt financing that raised $302.5mm ($7mm higher than the previously announced $295.5mm) via the sale of ~30.9mm subscription receipts at $9.80/share, ~14% premium to the current share price and ~25% premium to the five-day VWAP prior to the CRH acquisition being announced. The funds will be held in escrow until the acquisition closes (expected in Q2/F21), at which point they will be released and each subscription receipt will automatically convert into one common share. If the acquisition does not close on or before June 30, 2021, unless otherwise agreed by the holders of subscription receipts, the escrowed funds will be returned.
The closing of the financing should alleviate any financing-related concern related to the acquisition, given that the net proceeds account for ~80% of the purchase price of ~$375mm, with the balance to be funded from its new bank debt and existing cash.
Insiders and Li Ka-Shing continue to buy. Led by a +$0.5mm investment by Chairman and CEO Hamed Shahbazi, WELL's entire leadership team invested $1mm. Its major shareholder, Li Ka-Shing, along with his associates, had the lead order, investing $100mm in the deal (over $132mm invested to date), providing a strong endorsement for the acquisition and WELL's strategy and outlook.
No changes to our estimates. We will revise our estimates to account for the financing and acquisition once the CRH acquisition closes. For a more detailed analysis of the financing and the acquisition, please refer to our note here.
M&A activity expected to remain brisk. Despite announcing by far its largest acquisition to date in CRH, we believe WELL will continue to be active on the M&A front, likely with smaller deals similar to past acquisitions, aided by its large pipeline of 100+ targets and nine signed LOIs. CRH's strong FCF generation will help fund its similarly acquisitive strategy, and likely WELL's too, that should augment WELL's overall growth post-close,