Hooper Holmes and Provant to Merge

  • All-stock, accretive transaction increasing scale and enhancing scope
  • Pro-forma 2016 revenue of $67 million
  • Provides scale and significant cost saving synergies
  • Financing in place to support transaction and working capital
  • Strength of product offering and diversification of distribution channels accelerates innovation for existing customers and growth
  • Expected to close in 2017 second quarter
  • Olathe, Kan. and East Greenwich, R.I., Wednesday, March 8, 2017 — Hooper Holmes Inc. (NYSE:HH) and Provant Health Solutions LLC have agreed to combine in an all-stock transaction which will create one of the largest, pure-play health and wellness companies in the United States. On a combined basis, 2016 pro-forma annual revenue of the merged company is approximately $67 million, excluding $3.8 million of pass-through gift card revenue at Provant. This transaction is expected to significantly improve financial performance, expand the merged company’s combined national network of local health professionals and advance its well-being solutions technology.

    “Scale, growth and synergies will create a compelling financial model and are expected to improve operating cash flow for our merged company. Our channel partners will be supported by an expanded network of local health professionals and direct customers will gain access to an expanded suite of personalized digital services that promote, track and measure healthy behaviors and outcomes,” said Henry E. Dubois, Chief Executive Officer of Hooper Holmes.

    “Combining Hooper’s market-leading clinical services with Provant’s expertise in member service, personalized well-being and advanced analytics will deepen collaboration with our customers and channel partners,” said Heather Provino, Chief Executive Officer and founder of Provant. “Best-in-class, strategic partnerships are essential for capitalizing on the massive opportunity our industry is seeing in order to take advantage of the paradigm shift occurring in consumerism. We believe this powerful combination will drive innovation for our clients and accelerate growth.”

    The transaction has compelling strategic and financial benefits for both health and wellness solutions companies. Provant and Hooper represent an exceptionally synergistic merger, bringing together unique specialties that cross business verticals. The merged company will be highly focused on leveraging each company’s expertise to maximize growth, broaden market appeal and provide additional value that aligns with the objectives of clients and channel partners. The two companies have no customer overlap and both target growing healthcare market segments.

    Synergies from leveraging fixed costs and optimizing services and processes are expected to significantly reduce the merged company’s cost structure, supporting a more efficient organization. The merger is expected to be accretive to adjusted EBITDA in full year 2017.

    Under the terms of the transaction Hooper Holmes will issue approximately 10.5 million shares of common stock to Provant’s owners and the merged company will raise $3.5 million in new equity capital. Century Equity Partners, the majority shareholder of Provant, has committed to $1.75 million of the $3.5 million equity raise and certain existing Hooper shareholders and insiders have committed to an additional $1.6 million, for a total of $3.3 million of the $3.5 million already committed.

    Financing

    Financing to support the transaction and provide working capital has been arranged from SWK Holdings, a specialized finance company focused on the healthcare sector, through a $6.5 million, five year term loan at LIBOR plus 12.5%, a reduction of 150 basis points from Hooper’s current term facility. Principal repayments start in the first quarter of 2019. The company has also expanded its current asset-based credit facility from $7 million to $10 million with an accordion to $15 million during high-volume months.

    Both of Hooper’s current lenders are participating in this transaction and are providing sufficient working capital to support integration and growth. At close, the merged company is expected to have cash on hand of $2-3 million and $10-12 million in receivables.

    Management and Governance

    Upon closing, Henry Dubois will serve as Chief Executive Officer of the merged company and Heather Provino will serve as Chief Strategy Officer. Further maintaining strength in leadership, Mark Clermont of Provant will serve as President and Steven Balthazor of Hooper Holmes will  serve as Chief Financial Officer.

    The Board of Directors will consist of seven members, three of which will be current Hooper Holmes directors, three of which will be current Provant directors and one independent director who currently chairs Hooper’s audit committee. The company will continue to trade under the HH stock symbol. The company will have two major locations in Olathe, Kansas and East Greenwich, Rhode Island.

    Approvals and Time to Close

    The company expects to file a Form S-4 within the next ten days. Once the S-4 is effective, shareholder approval of the transaction is anticipated in 30 days. Closing is anticipated in late April or early May 2017.

    Advisors

    Cantor Fitzgerald has advised Hooper Holmes. Raymond James has advised Provant.