HealthLynked (OTCQB:HLYK) Corp revealed that it has signed a definitive agreement to sell its ACO Health Partners (AHP) subsidiary to PBACO Holding LLC (PBA), which does business as Palm Beach Accountable Care Organization (PBACO) in a cash-and-stock deal.
In a statement, HealthLynked founder CEO Dr Michael Dent said: "We are thrilled to be working with such a like-minded group that prioritizes physician efficiency and high-quality patient care.”
“We look forward to expanding our relationship by offering our HealthLynked online concierge services to their participating practices and patients," he added.
Investors reacted to the news by sending HealthLynked shares up 7.7% to nearly $0.16 on the OTC Markets in morning trade.
READ: HealthLynked reports impressive initial results for Medical Membership program
Under the terms of the agreement, Naples, Florida-based HealthLynked which connects patients, doctors and data through its global healthcare network using technology to reduce costs and improve patient outcomes, will receive the following consideration:
- $750,000 in cash paid at signing of the definitive agreement; and
- Up to $2.25 million incremental cash based on agreement to participate in PBACO by AHP's existing physician practices or newly added practices, scaled based on the number of covered patients transferred to PBACO by July 31, 2023.
Meanwhile, if PBA completes a planned initial public offering (IPO) by August 1, 2024, HealthLynked will receive shares in the public entity at the time of the IPO with a value equal to AHP's 2021 earnings times the EBITDA multiple used to value the public entity's IPO shares, net of any cash consideration previously paid by the buyer.
For example, if the Healthlynked portion of the public entity's shares is valued at $10 million, HealthLynked would receive $10 million in shares of the public entity, excluding the $3 million in cash it has received pre-IPO, for a net incremental amount of $7 million in IPO shares.
According to the company, the total consideration, including all IPO shares, vest half at the time of the IPO and half subject to a five-year earnout based on the performance metrics of AHP, or until AHP is transferred to PBACO. The transfer is expected to occur by 2024, at which time the earnout conditions would no longer apply and the balance of the escrowed earnout shares would be issuable to HealthLynked without any required performance metrics.
The firm noted that if PBA goes public through means other than an IPO, the parties will modify the terms. On the other hand, if PBA doesn’t go public within 18 months of the signing date, by August 1, 2024, the transaction will be capped at the initial cash consideration of up to $3 million.
HealthLynked will also receive the net proceeds, including allocation for expenses, from any Medicare Shared Savings related to AHP's performance year 2022, which, if earned, would be determined, and paid by the Centers for Medicare and Medicaid Services by October 2023.
HealthLynked will allocate up to $500,000 of the incremental $2.25 million participation-based cash proceeds as an advance to AHP's participating physicians to incentivize participation in PBACO. Participating physician advances will be repaid out of AHP's 2023 performance year Medicare Shared Savings received in 2024, said the company.
PBA assumes responsibility for managing AHP's business operations and for AHP's operating expenses effectively from January 17, 2023.
In a nutshell, formal transfer of equity ownership of AHP from HealthLynked to PBA will occur at the earlier of PBA's IPO; PBA going public by other means, or if PBA doesn’t go public on August 1, 2024. Until that time, HealthLynked has the right, but not the obligation, to reacquire AHP for a price equal to any consideration already paid by PBA for AHP, plus all expenses incurred by PBA in operating AHP after January 16, 2023.
HealthLynked said it has discontinued its ACO/MSO business segment with the transfer of operations to PBA.
"HealthLynked and AHP are very excited to partner with PBA to have our accountable care organization (ACO) participating practices and their Medicare patients in the very capable hands of PBACO, the No. 1 one ACO in Medicare shared savings in four of the last five years with 100% quality scores over the last two performance years," said HealthLynked CFO George O'Leary.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive
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