The rush of M&A activity in the digital health space continues as a deal involving a blank check company and two virtual care companies has created a new public digital health company.
The deal between UpHealth Holdings, Cloudbreak Health and special purpose acquisition company GigCapital2 put the combined company at an enterprise valuation of about $1.35 billion, according to the companies in a press release (PDF).
The merger is expected to be completed in the first quarter of 2021, subject to the usual closing conditions. Upon the closing of the transaction, the combined company will be named UpHealth Inc. and will continue to be listed on the NYSE under the new ticker symbol “UPH.”
UpHealth Holdings is one of the largest national and international digital healthcare providers, and Cloudbreak provides unified telemedicine and video medical interpretation solutions.
The deal combines UpHealth's patient care management, telemedicine and digital pharmacy services with Cloudbreak's video consultation platform for doctors and patients.
RELATED: How Teladoc's blockbuster deal could impact the entire virtual care landscape
The newly formed company sits at the intersection of multiple global growth markets: telehealth, integrated care management, behavioral health and the $500 billion prescription drug market.
Executives at the newly formed company say it is one of the only "profitable, publicly-traded, comprehensive global digital healthcare companies."
GigCapital2 raised $150 million in its public offering in June 2019 and is a $174 million-dollar publicly traded company, according to an investor presentation.
Following completion of the deal, UpHealth will have agreements to deliver digital healthcare in more than 10 countries globally. The company will generate approximately $115 million in revenue and over $13 million of EBITDA in 2020. Following the combination, UpHealth expects revenue to rise to $194 million in 2021, and the company will generate $24 million in EBITDA next year, the company said.
The company has established contracts with health providers, insurers and payers in all 50 states in the U.S. as well as nine international markets.
RELATED: Digital health company Hims & Hers goes public in blank check deal
There has been a flurry of M&A activity in the digital health space this year, spurred by the growth in virtual care from the COVID-19 pandemic.
Teladoc's acquisition of Livongo in a $18.5 billion deal combined two of the largest publicly traded virtual care companies and created a health technology giant.
Private tech companies also have been looking to merge with a SPAC or blank check company as a nontraditional route to go public rather than a typical IPO. With the IPO market rattled by COVID-19 and wild volatility, it has become a more attractive way to go public.
There has been an increasing number of technology-focused blank check companies issued in recent months, including SOC Telemed, Hims & Hers, Clover Health and Augmedix.
Former Livongo executives who didn't make the jump to Teladoc are backing a new blank check healthcare technology and are preparing an IPO of up to $500 million.
Disrupting digital health
Al Gatmaitan and Ramesh Balakrishnan will serve as co-CEOs of UpHealth. Chirinjeev Kathuria, M.D., co-founder and executive chairman of UpHealth, and Avi Katz, founder and executive chairman of GigCapital2, will serve as co-chairmen of the board of directors.
Kathuria said in a statement the company combines primary care with integrated care management and overlays pharmacy and behavioral telehealth services to provide a "one-stop-shop" platform to improve health outcomes, quality, costs and patient experience.
"The business combination strengthens UpHealth to further penetrate the broad and fast-growing digital health and telehealth market," said Kathuria.
Following the combination, UpHealth will be established in fast-growing sectors of the digital health industry and will provide a single, integrated platform of best-in-class technologies and tech-enabled services essential to personalized, affordable and effective care, company executives said.
RELATED: Former Livongo execs start new company and prepare for $500M IPO
UpHealth’s multifaceted and integrated platform provides health systems, payers and patients with a frictionless digital front door that connects evidence-based care, workflows and services.
Company executives believe the COVID-19 pandemic has accelerated 10 years of digital health progress in three months.
The new company is extremely well positioned to meet the immediate impact of COVID-19 as well as the new normal of care delivery post-pandemic where digital health plays a more prominent role in integrated care coordination.
Needham & Company serves as exclusive financial adviser, Husch Blackwell serves as legal counsel and Plante Moran serves as auditor to UpHealth on the deal.
Sidley Austin LLP serves as legal counsel to Cloudbreak. Nomura Securities International Inc. serves as exclusive financial and capital markets adviser, DLA Piper (U.S.) serves as legal counsel and BPM LLP serves as auditor to GigCapital2.
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November 25, 2020 at 03:10AM
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UpHealth, Cloudbreak merge with blank check company in $1.35B deal - FierceHealthcare
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