Hims & Hers to Become Publicly-Traded via Merger with Oaktree Acquisition Corp. (OAC)

October 1, 2020 8:18 AM EDT

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Hims, Inc. (“Hims & Hers” or the “Company”), a market leading telehealth company, and Oaktree Acquisition Corp. (NYSE: OAC.U, OAC, OAC WS), a special purpose acquisition company sponsored by an affiliate of Oaktree Capital Management, L.P. (“Oaktree”), announced today that they have entered into a definitive merger agreement. Upon completion of the transaction, the combined company’s securities are expected to be traded on the New York Stock Exchange (NYSE) under the symbol “HIMS.”

Company Overview

Launched in 2017, Hims & Hers has built a proprietary platform that connects consumers to licensed healthcare professionals for care across numerous specialties, including primary care, mental health, sexual health and dermatology, among others. Since its founding, the Company has facilitated more than two million telehealth consultations, enabling greater access to high quality, convenient and affordable care for people in all 50 states. The Company has driven 100%+ compounded annual revenue growth over the last two years and has more than doubled gross margins to 70%+, with revenue that is over 90% recurring in nature.

The future of healthcare will be led by consumer brands that empower people and give them full control over their healthcare. A direct relationship with consumers is the most valuable component in the healthcare system. Hims & Hers has endeavored to build a healthcare system that squarely focuses on the needs of the healthcare consumer. Hims & Hers directs the consumer experience from start to finish, uniquely positioning the Company in the rapidly-emerging telemedicine landscape to lead the industry in B2C-focused telehealth solutions.

Hims & Hers has built a strong customer base of highly loyal brand ambassadors who represent the future of the healthcare system. The Company’s customers embrace its convenient, digitally native product, generating organic growth through word of mouth and user-generated content, which enhances brand awareness and lowers customer acquisition costs. The majority of its consumers are millennials, a high-value generation at the beginning of its lifetime value curve that is poised to expand its purchasing power. The Hims & Hers platform is set up to serve these customers over the long-term by offering great user experience and access to high quality medical care.

As of June 2020, Hims & Hers had approximately 260,000 subscriptions on the platform.

Management Comments

“We’re thrilled to partner with Oaktree Acquisition Corp. to usher Hims & Hers into our next phase of growth as we work to become the front door to the healthcare system, serving as the first stop for peoples’ health and wellness needs across hundreds of conditions,” said Andrew Dudum, CEO and founder of Hims & Hers. “Hims & Hers was founded to make it easier and more affordable for everyone to get the healthcare they need. We remain committed to advancing that goal as we expand into new categories of care and build an enduring healthcare company that brings choice, affordability and access to consumers.”

“We are very pleased to launch our Oaktree Acquisition Corp. franchise with this partnership with Hims & Hers, a rapidly-growing provider of much-needed innovation to the healthcare system,” said Howard Marks, Co-Chairman of Oaktree. “This transaction shows Oaktree Acquisition Corp. to be a complementary extension of Oaktree’s capabilities and builds on our strength in sourcing opportunities throughout the market cycle.”

“We founded Oaktree Acquisition Corp. to partner with a high quality, growing company that will benefit from a public currency for its next leg of growth,” said Patrick McCaney, CEO of Oaktree Acquisition Corp. “Hims & Hers is an ideal match and represents a unique opportunity to invest in a rapidly-growing company that is modernizing the delivery and accessibility of healthcare and wellness solutions. Over the past two years, the Company has experienced significant growth bolstered by the continuing widespread adoption of telehealth and digital patient care solutions – and we think this is just the beginning. We look forward to partnering with Hims & Hers to accelerate the expansion of its high-quality, end-to-end care services across the broader healthcare marketplace.”

Key Transaction Terms

The business combination values the combined company at an enterprise value of approximately $1.6 billion and is expected to deliver up to $280 million of cash to the combined company through the contribution of up to $205 million of cash held in Oaktree Acquisition Corp.’s trust account, and a $75 million concurrent private placement (PIPE) of common stock of the combined company, priced at $10.00 per share, from leading institutional investors, including funds managed by Franklin Templeton and certain Oaktree clients. The enterprise value equals 8.9x estimated 2021 revenue and 12.2x estimated 2021 gross profit, an attractive valuation relative to telehealth peers despite the Company’s leading growth and margin profile.

As part of the transaction, Hims & Hers’ current management and existing equity holders will roll nearly 100% of their equity into the combined company. Leading existing institutional backers of the Company including Founders Fund, Forerunner Ventures, IVP, Redpoint Ventures, Thrive Capital, McKesson Ventures, and the Canadian Pension Fund intend to roll 100% of their shares and the transaction agreement provides for up to $75 million of cash consideration at closing to shareholders, at their election. Assuming no public shareholders of Oaktree Acquisition Corp. exercise their redemption rights and before any potential cash consideration to Hims & Hers shareholders, current Hims & Hers equity holders will own approximately 84%, Oaktree Acquisition Corp. shareholders will own approximately 12%, and PIPE investors will own approximately 4% of the issued and outstanding shares of common stock, respectively, of the combined company at closing. Furthermore, the combined company will be capitalized with up to $330 million in cash, including proceeds received from the transaction together with existing cash on Hims & Hers’ balance sheet. The business combination includes a minimum cash closing condition of $200 million, which is calculated as cash delivered from Oaktree Acquisition Corp.’s trust account, plus cash delivered from the PIPE, minus the up to $75 million of cash consideration at closing to shareholders as described above. Hims & Hers intends to continue investing in growth and new product categories to accelerate its goal of becoming the digital front door to the healthcare system.

The transaction, which has been unanimously approved by the Boards of Directors of each Hims & Hers and Oaktree Acquisition Corp., is subject to approval by Oaktree Acquisition Corp.’s shareholders and other customary closing conditions. The transaction is expected to close in the fourth quarter of 2020.

A more detailed description of the transaction terms and a copy of the Agreement and Plan of Merger will be included in a current report on Form 8-K to be filed by Oaktree Acquisition Corp. with the United States Securities and Exchange Commission (the “SEC”). Oaktree Acquisition Corp. will file a registration statement (which will contain a proxy statement/ prospectus) with the SEC in connection with the transaction.

Advisors

LionTree Advisors is serving as exclusive financial advisor to Hims & Hers and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP is serving as legal counsel.

Credit Suisse and Deutsche Bank Securities are serving as capital markets advisors and private placement agents to Oaktree Acquisition Corp. Deutsche Bank Securities is acting as financial advisor to Oaktree Acquisition Corp. Kirkland & Ellis LLP is serving as legal counsel to Oaktree Acquisition Corp.

Management Presentation

A presentation made by the management teams each of Hims & Hers and Oaktree Acquisition Corp. regarding the transaction will be available on the websites of Oaktree Acquisition Corp. at https://www.oaktreeacquisitioncorp.com/news and Hims & Hers at forhims.com/investor and forhers.com/investor. Oaktree Acquisition Corp. will also file the presentation with the SEC as an exhibit to a Current Report on Form 8-K, which can be viewed on the SEC’s website at www.sec.gov.

About Hims & Hers

Hims & Hers is a multi-specialty telehealth platform that connects consumers to licensed healthcare professionals, enabling them to access high quality medical care for numerous conditions related to primary care, mental health, sexual health, dermatology, and more. Launched in November 2017, the company also offers thoughtfully created and curated health and wellness products. With products and services available across all 50 states and Washington, D.C., Hims & Hers is able to provide all Americans access to quality, convenient and affordable care through a computer or smartphone. Hims & Hers was founded by CEO Andrew Dudum, Hilary Coles, Jack Abraham and Joe Spector at venture studio Atomic in San Francisco, California. For more information about Hims & Hers, please visit forhims.com and forhers.com.



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