WELL Health Technologies rings the opening bell at the Toronto Stock Exchange to celebrate graduating to the big board on Friday, January 10, 2020. WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News, Analysts, Financials TSX:WELL) has hit another important growth milestone, according to Beacon Securities analyst Gabriel Leung, who reviewed WELL\u2019s latest acquisition announcement in a client update on Monday. With the update, Leung moved his rating from \u201cSpeculative Buy\u201d to \u201cBuy,\u201d saying the prospect of bigger sales and earnings are deserving of the upgrade. WELL Health, a Vancouver-based omni-channel digital health company, on Monday announced a definitive agreement to acquire MyHealth Partners, an Ontario-based provider of primary care, specialty care, telehealth services and accredited diagnostic health services. MyHealth has 48 locations across Ontario, with 760 healthcare professionals, including 160 physicians, and half a million patient visits over the trailing 12 months ended May 2021. The deal would see WELL pay $206 million upfront for MyHealth plus a four-year performance earnout of $60 million. The $206 million is to consist of $82 million in cash (to be funded by a new credit facility), $94.3 million in shares at $9.80 per share or a 37-per-cent premium to the June 4, 2021, close and a $30-million vendor takeback note that will mature in $10-million tranches in three, six and nine months after the transaction\u2019s close, payable in cash and\/or stock. Acquiring MyHealth will make WELL the largest and most capable non-governmental owner-operator of outpatient medical clinics in Canada, WELL CEO Hamed Shahbazi said. \u201cMyHealth is a tech enabled and forward-thinking network delivering roughly three quarters of its medical consultations via telehealth,\u201d Shahbazi said in a press release. \u201cTo our knowledge, this will position WELL as the leading multi-disciplinary provider of telehealth services in Canada due to the breadth and depth of primary and secondary healthcare service offerings including a substantial telecardiology and teleradiology program. Once the transaction has closed, WELL's combined annualized revenue and EBITDA run-rates will approach $400 million and $100 million respectively.\u201d The deal would be the second-largest in WELL\u2019s history after the US$369-million acquisition earlier this year of gastroenterology and anesthesia business CRH Medical and would give WELL 74 clinics in total across Canada. Along with primary and executive health clinics and its telehealth businesses in Canada and the US, WELL has verticals in Electronic Medical Records (EMR), a digital health applications platform as well as billing and cybersecurity-related solutions. WELL said in the press release that MyHealth has had a strong performance during the pandemic with its revenue model showing \u201cdemonstrated resilience to downturns and other seasonal factors.\u201d WELL\u2019s share price was a big winner in 2020, returning 416 per cent for the year. So far in 2021 the stock is down 11 per cent. But Leung sees upside in the 12 months to come. With his update and \u201cBuy\u201d recommendation, Leung has increased his price target from $10.00 to $12.00, which at the time of publication represented a projected one-year return of 56 per cent. On the MyHealth deal, the analyst is estimating that WELL would be paying 2.1x sales and 10.3x EBITDA or 6.5x if all earnouts are achieved. Proforma, Leung said the deal would put WELL at over $400 million in sales, about $85 million in shareholder EBITDA, would leave the company with about $60 million in cash and about $300 million in debt and about 215 million fully diluted shares. Leung noted the deal should close in the third quarter 2021 and is contingent on the usual regulatory approvals along with approval from the Ontario Ministry of Health. \u201cIn our opinion, this is another milestone acquisition for WELL for several reasons,\u201d Leung wrote. \u201cFirst, post-transaction, WELL will be positioned as the largest owner-operator of outpatient medical clinics and a leading multi-disciplinary telehealth service provider in Canada. MyHealth\u2019s 48 accredited diagnostic facilities also provides OHIP-covered specialty services to over 10,000 referring physicians.\u201d \u201cSecond, MyHealth\u2019s doctors already use WELL\u2019s Oscar Pro EMR and are using Insig Health\u2019s workflow and patient intake platform and will be able to leverage WELL\u2019s digital teleconference solutions down the road,\u201d he said. \u201cThird, the acquisition further enhances WELL\u2019s cash flow generation, which will enable the company to further advance its M&A growth plans (with minimal share dilution). Note that the company still has 7 LOIs outstanding, which it hopes to close later this calendar year,\u201d Leung said. Factoring the MyHealth deal and a pair of recent CRH-related tuck-ins into his estimates, Leung is now calling for WELL to generate 2021 revenue and EBITDA of $263.7 million and $48.0 million, respectively, and 2022 revenue and EBITDA of $413.1 million and $$86.0 million, respectively. (All figures in Canadian dollars except where noted otherwise.) \u201cUsing our current 7x EV\/Sales multiple on calendar 2022 estimates results in a $12.00 target (up from $10.00). Given the company\u2019s larger revenue and EBITDA scale, we are also adjusting our rating to Buy (from Speculative Buy),\u201d Leung said. Disclosure: WELL Health is an annual sponsor of Cantech Letter. Cantech Letter's Nick Waddell and Jayson MacLean own shares of WELL Health.