Akumin likely won’t get a better offer than Stonepeak, Clarus says

The deal from private equity firm Stonepeak to acquire Akumin (Akumin Stock Quote, Chart, News, Analysts, Financials Nasdaq:AKU) likely won’t be topped, says Clarus Securities analyst Noel Atkinson.

On October 20, Akumin announced it had reached a deal with private equity firm Stonepeak to go private.

“Today’s announcement marks the successful culmination of a thorough strategic review process to ensure we have the right capital structure in place to support our long-term success,” said CEO Riadh Zine. “As a result of this transaction, Akumin will move forward as a private company with increased financial flexibility and a strengthened balance sheet, better positioned to execute on our strategic plan to become the outpatient partner of choice for hospitals and health systems. We are pleased to enter this agreement with Stonepeak, which we believe will enable us to maximize the value of our business and create the best path forward for all of our stakeholders.”

Atkinson summarized the development, noting that the prepackaged deal saves Stonepeak’s (US) $360-million investment in Akumin.

“After straining under a huge debt load from then Alliance Healthcare acquisition and the ongoing impact of labor inflation, Akumin is to be acquired by its private equity partner Stonepeak via a prepackaged Chapter 11. It seems like an elegant solution for Stonepeak to protect its investment and get a relatively complicated deal to close quickly (as little as 45 days). Stonepeak and Akumin have received support for the deal from AKU’s trade lenders, a supermajority of noteholders, and shareholders holding 1/3 of the outstanding. The 2025 senior notes will be extended to 2027, and all senior notes will get an interest rate bump. There will also be a Dutch auction for up to US$60MM of senior notes whose holders would prefer to sell rather than extend. Stonepeak will purchase all shares not held by it for a total of US$25MM in cash (~US$0.27/share on a fully-diluted basis) and issue “contingent value rights” (CVRs) that provide an earn-out on a future IPO or sale of Akumin (above an initial equity hurdle of ~US$750MM for Stonepeak). The cash value alone is an 80% premium to Friday’s closing price. Stonepeak will also provide US$75MM of DIP financing and cancel its US$470MM of 2032-2033 unsecured notes (including accrued PIK interest).

The analyst, who had a “Hold” rating on the stock, explained why a better offer is probably not on the horizon.

“We do not expect any superior offers – especially with AKU reeling from a cyberattack over the past several days,” he argued. “Given that Stonepeak is providing the DIP financing, cancelling its subordinated notes, offering to buy US$60MM of senior notes, and paying shareholders US$25MM plus the CVRs, we do not expect a superior bid. This is doubly likely since the deal is going ahead even with AKU suffering under a crippling cyberattack since mid-October. AKU shares were already slated to delist from NASDAQ on October 26 due to being under the minimum price level. It could prove a valuable trade to hold the AKU shares to get the US$0.27/share of cash and the earn-out right, rather than exiting now (assuming that AKU shares do not price in a premium for the CVRs). This might be one of the rare times that a “hold” rating could be considered a positive in our line of work”.