Have a $7.50 target. GLTA
WELL HEALTH TECHNOLOGIES CORP
Announces Agreement With MCI Onehealth To Acquire 11
Clinics, Provide Bridge Loan & Convertible Debenture
Our Conclusion:
WELL Health announced it has agreed to a strategic alliance with MCI
Onehealth headlined by the acquisition of 11 clinical assets from MCI that
are expected to generate $21MM in annual revenue. MCI has been facing
challenges raising capital and had been undergoing a strategic review in light
of the company’s liquidity and operational challenges, which today’s
announcement brings to a close. MCI’s clinics have been operating at a loss
for the last eight quarters, and WELL will aim to bring the clinics to EBITDA
profitability in 2024. Based on MCI’s disclosure the company’s 14 Ontario
clinics were sold to WELL for $1.5 million. We expect that the 2023 revenue
contribution from the clinics is included in WELL’s recent guidance update.
Key Points:
Clinical Assets: The clinical assets WELL is acquiring are located in
Southern Ontario and offer a range of services including primary care, family
medicine, women’s health and other specialties, and bring 130 physicians to
WELL. WELL will integrate the MCI clinics with its Ontario-based supply
chain. The clinics are expected to contribute $21 million in annual revenue,
and based on MCI’s disclosure have been operating at a loss for several
quarters. Management expected to be able to turn operations EBITDA-
positive by 2024. We expect ~$5MM in quarterly revenue for FQ4 this year
after the transaction closes in October, and a negative EBITDA contribution.
WELL previously acquired MCI’s Alberta clinical operations consisting of five
clinics in Alberta in May, spending $2 million in total consideration.
Short-term Bridge Loan: WELL also announced a short-term bridge loan to
MCI ($3 million bearing interest at prime+9%), designed to ensure the
company has the required resources to operate until the transaction closes,
which is expected in October. After closing of the transaction WELL will also
have representation on MCI’s board of directors.
Convertible Debenture: MCI plans to complete a convertible debenture
financing to raise between $7.5 million and $10 million, to which WELL will
participate as lead investor, for a minimum of $2.5 million of the total
financing. On closing of the transaction, WELL will be provided with certain
rights associated with call options granted by two shareholders of MCI for up
to 30.8 million Class A subordinate voting shares and 30.8 million Class B,
(representing an aggregate of approximately 81.5% of the votes attributable
to all issued and outstanding shares of MCI). MCI plans to use the proceeds
from the convertible denture financing for advancement of its research
offerings, focused on the use of AI in healthcare. This investment is part of
WELL’s AI investment program.