Acute care telemedicine company SOC Telemed, formerly known as Specialists on Call, has agreed to be acquired and taken public by Healthcare Merger Corp. in a “blank check” deal, the two companies announced Wednesday.
The deal, which values Reston, Virgina-based SOC Telemed at about $720 million, is expected to close in the fourth quarter of this year. The combined company will operate as SOC Telemed and be listed on the Nasdaq.
Healthcare Merger Corp. is a special purpose acquisition company, partially backed by private equity firm Shulman Ventures. Effectively a shell company, it raised $250 million in cash in an initial public offering in December 2019.
Companies can turn to such blank check companies as a route to going public giving them guaranteed access to capital in lieu of a traditional initial public offering, though many blank check IPOs have underperformed in the past.
As part of the SOC deal, BlackRock, Baron Capital Group and ClearBridge Investments, among others, have committed to invest $165 million in common stock in the combined company.
SOC’s management and equity holders — including private equity giant Warburg Pincus, SOC’s existing majority equity holder — will shift a portion of equity into SOC to help the company pay down existing debt, buy out some shareholders and strengthen its balance sheet.
The companies expect current SOC equity holders to retain 40% of the company, Healthcare Merger Corp.’s shareholders to own 32%, private investment in public equity (PIPE) investors to own 21%, and Healthcare Merger Corp.’s sponsor will own 7%.
Warburg Pincus will remain its largest shareholder.
SOC leadership will also experiencing some reshuffling as part of the deal. Interim CEO Paul Ricci will step down as chief executive, to be replaced by John Kalix, SOC’s current president.
Healthcare Merger Corp.’s CEO Steve Shulman will become chairman of SOC’s board of directors. Shulman is also on the boards of VillageMD, a primary care physician network, and Magellan Health, a managed care company.
SOC’s telemedicine is used primary inside hospitals to assist its onsite medical professionals with real-time specialty care, through its software platform, IT team and network of clinical specialists. It’s used in almost 850 care sites, including 543 acute care hospitals across 47 states, including 19 of the 25 largest U.S. health systems, and has delivered more than 1 million acute care consultations.
SOC reported $5.7 million in bookings in the first half of 2020, a record for the company. SOC reported $66.2 million in revenue last year and expects $57.3 million in revenue this year.
The provider market is a rapidly growing area of interest for telemedicine companies, and has a significant untapped client base as hospitals, some for the first time, look to invest in virtual care amid the COVID-19 pandemic. About 90% of health systems expect to increase spending on clinician-to-clinician acute care telehealth in the next 12 to 18 months, according to a EY-Parthenon study in June.
However, SOC faces significant competition, as large vendors like Teladoc and Amwell are increasingly interested in the acute telemedical space, pursuing organic and inorganic growth and reams of solutions already exist that are popular with smaller physician practices, like doxy.me and EHR vendors’ own platforms.