Acadia Healthcare (ACHC) to Sell U.K. Facilities for $390M; Offers Prelim. Q3 Results
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Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced the signing of a definitive agreement with BC Partners for the sale of 21 existing behavioral health facilities and one de novo behavioral health facility not yet opened, which are located in the United Kingdom. Acadia will receive £320 million (approximately $390 million) cash for the sale. The sale is subject to the approval of the Competition and Markets Authority (“CMA”) in the U.K. The facilities to be sold have approximately 1,000 total beds and produce aggregate approximate annual revenue of $162 million and adjusted EBITDA of $37 million, after overhead allocation and assuming an exchange rate of $1.22 per British Pound Sterling.
Joey Jacobs, Chairman and Chief Executive Officer of Acadia, remarked, “We are very pleased to announce the signing of a definitive agreement with BC Partners. Upon approval by the CMA, this sale will fulfill our previously announced undertakings to address the CMA’s concerns about the impact of our acquisition of Priory on competition for the provision of behavioral healthcare services in certain markets. We currently expect the CMA to approve the sale on or before November 18, 2016 and expect to complete the sale transaction shortly thereafter.
“Though we expect the CMA to approve the sale, the CMA is continuing its review process and could determine to reject the proposed sale and proceed with a Phase 2 investigation. We cannot integrate Priory’s business until the CMA completes its review process, including any potential Phase 2 investigation.”
Acadia also today announced its preliminary summary financial results for the third quarter ended September 30, 2016. These results are based on information available to management as of the date of this press release and are subject to revision upon finalization of the Company’s quarterly accounting and financial reporting procedures.
The Company expects revenue for the quarter to be approximately $735 million compared with $479.7 million for the third quarter of 2015. Loss from continuing operations attributable to Acadia stockholders is expected to be approximately $118 million, or $1.36 per diluted share, for the third quarter of 2016 compared with income of $29.5 million, or $0.42 per diluted share, for the third quarter last year. Our expected results include an anticipated loss on the U.K. divestiture of approximately $175 million, which includes an allocation of the goodwill related to our U.K. operations to the facilities held for sale of $107 million, estimated transaction-related expenses of $26 million, and a loss on the sale of properties of $42 million. Adjusted income from continuing operations attributable to Acadia stockholders is expected to be approximately $50 million, or $0.58 per diluted share, for the third quarter of 2016 compared with $43.9 million, or $0.62 per diluted share, for the third quarter of 2015. Consolidated adjusted EBITDA for the third quarter of 2016 is expected to be approximately $156 million compared to $108.5 million for the third quarter last year.
(Street sees Q3 EPS of 66c on revenue of $743 million)
Mr. Jacobs said, “Our adjusted EPS for the third quarter was lower than expected due to certain challenges in both the U.K. and the U.S. In the U.K., we believe that there was significant disruption to our operations as a result of the July 14, 2016 announcement by the CMA that the Priory acquisition would be referred for a Phase 2 investigation, unless we offered undertakings to address the CMA’s competitive concerns. The process of developing and implementing our proposed undertakings placed substantial and immediate demands on the U.K. management team, including many of the individual facility management teams, in addition to being a significant distraction for our U.K. operations in general because of the nature of the proposed undertakings. As one indication of the pervasive impact we believe the event had on our operations in the U.K., those operations produced same facility revenue growth for the third quarter of 5.1%, compared with 6.3% for the first half of 2016.
“Our U.S. operations were also affected by below-trend growth in same facility revenue, which increased 6.5% for the third quarter compared with 9.1% for the first half of 2016. While the growth rate for the third quarter improved from 5.9% for the third quarter last year, it is lower than we anticipated. In addition, our U.S. results for the third quarter reflected the impact of a slower than expected ramping of revenues from several de novo acute inpatient facilities that we have opened in 2015 and 2016.”
Acadia expects to issue its third quarter earnings release after the market closes on Tuesday, November 1, 2016 and to hold its conference call the following morning. Based on its preliminary financial results, the Company expects to adjust its financial guidance for 2016 and provide additional detail on its results of operations for the quarter in that news release and conference call.
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