Echo Healthcare Acquisition, which raised $58 million when it completed its IPO on March 17, 2006, has announced that it has entered into a definitive agreement to acquire XLNT Veterinary Care, Inc.
Echo Healthcare Acquisition Corp. To Merge With XLNT Veterinary Care, Inc.
Monday September 11, 9:10 am ET
VIENNA, Va., Sept. 11 /PRNewswire-FirstCall/ -- Echo Healthcare Acquisition Corp. ("Echo" or the "Company") (OTC Bulletin Board: EHHA - News) announced today that it has entered into a definitive agreement to acquire privately-held XLNT Veterinary Care, Inc. ("XLNT"). XLNT, which operates under the brand Pet DRx, is a provider of veterinary primary care services to companion animals through a network of fully-owned veterinary hospitals. The Company currently owns and operates 11 veterinary hospitals throughout California. As of September 11, 2006, XLNT has executed definitive agreements to acquire five additional veterinary hospitals that are expected to close within the next sixty days and has entered into nonbinding letters of intent with respect to twelve additional hospitals.
Under the Merger Agreement, XLNT shareholders will receive consideration consisting solely of shares of Echo's common stock. The final number of shares of Echo Common Stock issued to XLNT shareholders in consideration for the transaction will be determined pursuant to a formula based primarily on a 2x multiple of XLNT's pro forma annualized revenue (capped at $60 million for purposes of the formula) for the twelve months ended December 31, 2006 (including the pro forma annualized 2006 revenue attributable to any acquisitions completed by March 31, 2007), and divided by a price per share for Echo Common Share based primarily on the amount of cash in Echo's trust fund not to exceed $7.20. The number of shares to be issued to XLNT shareholders will be reduced to the extent XLNT has outstanding more than $16.5 million of indebtedness at the closing. Echo has the right to terminate the agreement if XLNT's full-year 2006 pro forma revenue is less than $48 million.
Gene Burleson, Chairman and CEO of Echo Healthcare, stated, "We believe our management team's experience in consolidating various segments of the healthcare services industry will provide XLNT with a distinct advantage in the rapidly growing veterinary care marketplace. We expect to utilize our expertise to help expand the Company's market share in a highly fragmented market through a variety of service augmentation strategies that have been utilized in the provision and delivery of human health care services. In addition to strong projected industry growth, the veterinary primary care market is attractive from an operational perspective because payment is received at time of service and there are minimal reimbursement issues, lower insurance costs and reduced litigation risk. We are excited about the tremendous potential of this business and believe the acquisition will put us on a path to increase value for our shareholders as we grow to become a dominant national provider of veterinary primary health care services."
Robert Wallace, Chief Executive Officer of XLNT Veterinary Care, commented: "Joining forces with Echo Healthcare gives XLNT access to additional capital to grow the Company faster than we could have grown on a stand-alone basis. In addition, the Echo Healthcare team is highly regarded for its experience and management strength, affording us the opportunity to leverage our existing dedication to continue development of the systems and patient care practices that we hope will position XLNT as one of the highest quality providers of patient care in our industry. I look forward to working together to expand our business in this fast growing industry."
Zubeen Shroff, Managing Director at Galen Partners, a private equity firm and current XLNT shareholder, added, "As the largest shareholder of XLNT, we strongly support this acquisition. We are pleased that the new company will bring to bear the combined strengths of XLNT and Echo Healthcare to maximize shareholder value."
Current management of XLNT will remain in place after the acquisition. The Board of Directors will initially consist of XLNT's chief executive officer, three members nominated by Echo, including Gene Burleson who will be Chairman, and three members nominated by XLNT's stockholders. Mr. Burleson has over 24 years of experience in the healthcare industry and will bring to XLNT significant experience in hospital and healthcare facility management. The resulting public company's name will be changed to Pet DRx.
This transaction has been reviewed and approved by special committees from both companies and has been approved by the Board of Directors of the respective companies. In addition to XLNT achieving specified minimum financial results, the transaction is subject to shareholder approval from both companies. The holders of more than a majority of the capital stock of XLNT entitled to vote at meetings of XLNT stockholders have agreed to vote their shares in favor of the approval of the merger. The transaction is expected to close in the second quarter of 2007.
Morgan Joseph & Co. Inc. acted as financial advisor to Echo in connection with this transaction. Echo is represented in the transaction by Powell Goldstein LLP, and XLNT is represented by McDermott Will & Emery LLP.
Investor Presentations
Echo will be filing with the Securities and Exchange Commission an investor presentation regarding the proposed transaction that will be used in connection with investor meetings that members of Echo's and XLNT's management teams will be conducting in the near future. A copy of this presentation will also be posted on Echo's web site (http://www.echohealthcare.com) under the caption "News Releases."
About XLNT Veterinary Care, Inc.
XLNT Veterinary Care, Inc. is a provider of veterinary care services to companion animals through a network of fully-owned veterinary hospitals. The Company currently owns and operates 11 veterinary hospitals in the state of California.
About Echo Healthcare Acquisition Corp.
Echo Healthcare Acquisition Corp. is a blank check company that was formed on June 10, 2005 to serve as a vehicle for the acquisition of one or more domestic or international operating businesses in the healthcare industry. On March 22, 2006, Echo consummated its initial public offering ("IPO") of 6,250,000 Units. On March 27, 2006, the Company consummated the closing of 937,500 additional Units subject to the underwriters' over-allotment option. The 7,187,500 Units sold in the IPO (including the 937,500 Units subject to the underwriters' over-allotment option) were sold at an offering price of $8.00 per Unit, which together with the private placement of the 458,333 warrants to certain stockholders and directors of the Company at an offering price of $1.20 per share, generated total gross proceeds of $58,050,000. Of this amount, $54,947,000 was placed in trust. Echo common stock trades on the OTC Bulletin Board under the symbol EHHA.OB. To learn more about Echo, visit the website at echohealthcare.com.
About Galen Partners
Galen Partners is a New York-based private equity firm, founded in 1990 and focused exclusively on providing equity financing to mid-to-later stage growth companies in the healthcare industry. With $648 million under management raised through four funds, Galen has invested in more than 60 companies. The firm emphasizes investments within medical device, technology- enabled outsourcing services and specialty pharmaceutical sectors. Galen's approach, called Collaborative Capital, enables them to work with company management to create disruptive strategies that generate revenue growth and help achieve full market potential. Over the past sixteen years, Galen Partners has been particularly adept at identifying, backing and developing future trend-setting, industry leaders including: Pyxis Corporation (a Cardinal Health company), CryoLife, Inc. (CRY), Encore Medical Corporation (ENMC), Lumenos, Inc. (a Wellpoint company), Ocular Sciences, Inc. (a CooperVision company), MiniMed, Inc. (a Medtronic company), Medicode, Inc. (a United Healthcare company), Stericycle, Inc. (SRCL), Taro Pharmaceutical Industries Ltd. (Taro), Vasogen, Inc. (VSGN) and Vitas Healthcare Corporation. For more information about Galen Partners please visit galen.com.
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