Reston’s SOC Telemed’s planned merger with a blank check company is expected to close Oct. 30, positioning its stock to begin trading on the public markets within days, company officials said Monday.
The deal with Healthcare Merger Corp. (NASDAQ: HCCO), a special purpose acquisition company based in New York, would allow the local telemedicine provider to start trading Nov. 2 on the Nasdaq stock exchange, said Hai Tran, SOC Telemed's chief financial officer and chief operating officer. The transaction values the local company at about $720 million.
SOC heads toward that target close date on the heels of a successful three quarters, and with strong projections for the upcoming months, at a time when telemedicine has taken top billing for health care providers because of the pandemic's restrictions on in-person appointments. The company reported Monday that it expects its contract bookings for 2020 to reach between $11.5 million and $12.5 million. That’s up from its previous estimate of $10.9 million, and an 88% to 105% increase from its 2019 performance.
It comes as SOC expands its services on 24 existing contracts — and brings on new customers altogether. That list of latest additions includes: Rockford, Illinois-based Mercyhealth of Wisconsin and Illinois; Crestview, Florida’s North Okaloosa Medical Center; Christiansburg, Virginia-based Carilion New River Valley Medical Center; Cleveland, Ohio’s St. Vincent Charity Medical Center; and New Orleans East Hospital.
The company has also cut down the time it takes to bring clients onboard, now to 92 days, which puts it “well on our way to achieve a record number of implementations by year-end,” said SOC Telemed President John Kallix in a statement.
“Our strong performance through the first three quarters of 2020 provides us visibility in delivering full-year results ahead of our initial projections,” Kallix said. “Through both new clients and cross-sales of existing clients, we have achieved a record level of bookings in the first nine months of 2020, and we've already surpassed total bookings for the entirety of 2019.”
Kallix is set to become CEO of the combined company. Paul Ricci, an advisor for major shareholder Warburg Pincus, plans to step down as SOC's board chairman and interim CEO, the latter of which roles he took on after former CEO Hammad Shah departed the company earlier this year. Tran will continue as CFO and COO. And HCMC CEO Steve Shulman will serve as chairman of SOC’s board of directors.
The company’s decision to go public through a merger with a “blank-check company” gave it necessary access to growth capital quickly, as the business sees fast-increasing demand for acute telemedicine, Ricci told us in July. The deal would also bring together HCMC’s health care leadership with SOC’s talent — which, he said, “just made a stronger organization.” It’s a move we’ve seen increasingly in the region, most recently with Silver Spring documentary streaming service CuriosityStream. The region saw another more traditional IPO from Silver Spring regenerative medicine company Aziyo Biologics.
When SOC’s deal closes, institutional investors BlackRock Inc., Baron Capital Group and ClearBridge Investments plan to invest $165 million in common stock of the combined company. SOC’s current management and equity holders — including its largest, New York private equity firm Warburg Pincus — will also put some of their equity into the combined business. The company said it plans to use proceeds from the transaction to pay down existing debt, buy equity from existing SOC shareholders and build up its cash.
Upon the deal’s close, current SOC equity holders would own 40% of the business, HCMC shareholders would own 32%, current investors would own 21% and HCMC’s sponsors — Shulman Ventures LLC and MTS Health Partners LP — would own 7%. Warburg Pincus will remain SOC’s largest shareholder after the transaction.
SOC focuses its telemedicine platforms on neurology, psychiatry and critical care areas. It also plans to expand into cardiology, infectious disease, hospital medicine, emergency medicine, maternal-fetal medicine, palliative care and oncology. Founded in 2004 as Specialists on Call, SOC now serves 847 provider facilities, including 543 acute-care hospitals, spanning 47 states. The company said it has provided 1 million acute-care consultations to patients.
