AMN Healthcare (AMN) Closes Advanced Medical Acquisition

Zacks Equity Research

AMN Healthcare Services, Inc. AMN recently concluded the Advanced Medical Personnel Services, Inc. buyout (announced previously on Apr 30, 2019). Advanced Medical has garnered a reputation of being an allied and nurse staffing firm, catering to hospitals, schools, clinics, skilled nursing facilities, and home health settings.

Financial Terms

The deal was completed for the previously announced purchase price of $200 million, with up to an additional amount of $20 million that will be paid upon Advanced Medical’s achievement of certain financial results as of Dec 31, 2019.

In order to finance the buyout, AMN Healthcare utilized $51 million in capacity available under its existing secured revolving credit facility. Further, the company amended its credit facility to obtain a new $150 million term loan maturing in June 2024.

Financial Impact of the Acquisition

The buyout will be accretive to AMN Healthcare’s second-quarter 2019 results with estimated revenues of about $5 million.

Advanced Medical is expected to contribute revenues in the range of $70-75 million and around $10 million adjusted EBITDA in the second half of 2019, with fourth-quarter revenues about 15% more than in the third quarter. This is because of the seasonality of Advanced Medical’s school staffing business.

On a combined basis, AMN Healthcare’s income tax rate for the second half of the year is projected to be 30% due to a higher tax rate for Advanced Medical. It will add approximately $0.3 million to depreciation expense in each of the third and fourth quarters.

How is AMN Healthcare Poised to Benefit?

With this buyout, AMN Healthcare will get an opportunity to boost its offerings in some of the rapidly growing and significant care settings. The buyout will help in expanding talent network of healthcare professionals, consequently increasing placement capabilities in the areas where there is most significant imbalances of talent supply and demand.

As part of AMN Healthcare, the combined teams will provide the healthcare industry's most creative and comprehensive services to a broad range of facilities, including schools, where there is a solid requirement for clinicians.

The acquisition has been structured to help the acquirer realize tax benefits with an estimated net present value of $8 million and is projected to be immediately accretive to AMN Healthcare's adjusted earnings per share.

Bright Prospects in Healthcare Staffing Market

Per a report by Grand View Research, the global healthcare staffing market is expected to reach $44.65 billion by 2025 at a CAGR of 6% during the forecast period. Increase in geriatric population can be attributed to demand for healthcare services worldwide. However, it is important to note that there is a shortage of efficient nurses and other healthcare professionals.

Zacks Rank and Share Price Performance

Currently, AMN Healthcare carries a Zacks Rank #3 (Hold). Shares of the company have gained 10.4% in the past three months, against the industry’s decline of 11.9%. Moreover, the stock has outpaced the S&P 500 index’s growth of 0.7%.

Key Picks

Some better-ranked stocks from the broader medical space are Cardiovascular Systems, Inc. CSII, Oxford Immunotec Global PLC OXFD and Haemonetics Corporation HAE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardiovascular Systems has earnings growth rate for fiscal fourth quarter of 2019 of 33.3%.

Oxford Immunotec has a long-term earnings growth rate of 25%.

Haemonetics has a long-term earnings growth rate 13.5%.

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