Joey Jacobs and his Acadia Healthcare leadership team will be very familiar with some of his main competition in Great Britain soon enough.
Last Friday, Universal Health Services — the company that bought Jacobs-run Psychiatric Solutions in 2010 — said it has paid $335 million for Cygnet Health Care, the owner of 15 behavioral health care facilities and two nursing homes in the U.K that have a total of 743 beds. UHS has in the past owned treatment centers in the U.K. and France but sold those a while ago. Its news comes three months after Acadia closed on its $662 million acquisition of Partnerships in Care, which oversees 23 facilities home to more than 1,200 beds.
On the face of it, investors seem to think Acadia is in better shape in the U.K. — and not just because its purchase was bigger. Acadia shares (Ticker: ACHC) spiked when Jacobs announced his deal while UHS stock (Ticker: UHS) fell more than 2 percent Friday and only inched up in Monday's session. That's despite the fact that the Franklin-based company paid about $532,000 per PiC bed compared to the $451,000 per bed UHS is paying for Cygnet.
Acadia Healthcare announced Wednesday it has completed the $662 million acquisition of Partnerships in Care, the United Kingdom's second largest behavioral health provider.
"We are very pleased to enter the U.K. market for inpatient behavioral care with such a high quality provider and well-established market leader as PiC," Joey Jacobs, Acadia CEO, said in a release. "We continue to believe that favorable market dynamics in the U.K. present a significant opportunity for accretive growth. With PiC's strong management team, supported by Acadia's experienced organization and access to capital, we are confident that we are well positioned to achieve our expectations for growth in the U.K., both organically and through additional acquisitions."
Shares of Acadia (Ticker: ACHC) were up 3 percent to $47.51 Wednesday morning. In the past 12 months, they're up 43 percent.
Acadia Healthcare CEO Joey Jacobs told investors at the Jeffries Global Healthcare Conference that the behavioral health company had been looking at the United Kingdom market for seven years before today's acquisition announcement.
Franklin-based Acadia is paying a private-equity firm $660 million in cash for Partnerships in Care, the second-largest independent provider of inpatient behavioral health services in the UK.
"We have been looking at the U.K. since seven years ago," Jacobs said. "At the time it was overpriced, we thought. Biding our time, this transaction came along. We now see the U.K. where the U.S. was in the early 2000s — shortage of beds, demand needs there, and a great management team in PiC that's going to be staying with us. The industry dynamics are very, very positive to us."
The deal is expected to grow Acadia by about 40 percent and significantly adjust the company's payer mix profile, diversifying revenue away from U.S. government payers. The company reports the U.S. Medicaid mix will decline from 45 percent to 33 percent.
Jacobs said the company would take its U.S. strategy overseas, growing on a same-store basis and making additional acquisitions in both countries.
"I believe we can consolidate there and make it the No. 1 independent provider in the U.K.," Jacobs said. He continued later: "There's more acquisitions to come, and there's large acquisitions in the U.S. that we're looking at."
President Brent Turner said domestically, the company is exploring further nonprofit opportunities and additional acquisitions in California.
"Why we're so bullish on where this industry sits — we're an inpatient psychiatric provider, and unlike medical and surgical that we're most commonly compared to, we do not worry about a lot of our business moving to the outpatient mode," Turner said.
Both Turner and Jacobs cited health reform and a "favorable legislative environment" as giving the company a reimbursement boost, but mental health party regulations only became effective this year.
"We're not enjoying a huge uptick in volumes because the Medicaid adult population is restricted from being reimbursed in a freestanding psychiatric hospital," Turner said. "But we are seeing some benefits from the private exchange where the benefits are covering mental health."
Shares of Acadia (Ticker: ACHC) jumped 15 percent to $48.48 Tuesday afternoon.
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