Startup Hims & Hers is going public through a merger with a special purpose acquisition company (SPAC) in a blank check deal.
The three-year old telehealth company will merge with Oaktree Acquisition Corp. in a deal that will value the company at about $1.6 billion. The combined company will have an estimated $330 million in cash after closing, comprised of cash on hand plus an expected $205 million from Oaktree Acquisition Corp. and up to $75 million from a concurrent private placement (PIPE) of common stock, priced at $10 a share, from institutional investors, the company said.
Upon completion of the transaction, the combined company’s securities are expected to be traded on the New York Stock Exchange under the symbol “HIMS.”
Reuters reported back in July that the company was exploring going public through a merger with a blank check acquisition company.
Oaktree Acquisition Corp. is a SPAC sponsored by an affiliate of Oaktree Capital Management L.P.
Private companies will look to merge with a SPAC or blank check company as a nontraditional route to go public rather than a typical initial public offering. With the IPO market rattled by COVID-19 and wild volatility, it has become a more attractive way to go public.
The blank check deal will enable Hims & Hers to further invest in growth and new product categories that will accelerate its plan to become the digital front door to the healthcare system, the company said in a statement.
Hims & Hers joins a growing list of digital health companies going public. It's the second health technology company to go public through a blank check deal. Acute care telemedicine company SOC Telemed is merging with Healthcare Merger Corp. in a deal that implies an initial enterprise value of approximately $720 million, according to the companies.
San Francisco-based Hims launched in November 2017 as a men's wellness brand offering skincare, hair-loss products and erectile dysfunction medication. It has since added a women’s health business, called Hers, focused on birth control, sexual health, and skin and hair care products.
The company now provides access to medical care and treatment for more than a dozen conditions with more than 50 products. It has scaled its business quickly and has facilitated more than 2 million telehealth consultations.
The company has driven 100%-plus compounded annual revenue growth over the last two years and has more than doubled gross margins to 70%-plus, with revenue that is over 90% recurring in nature, according to Hims & Hers.
As of June 2020, Hims & Hers had approximately 260,000 subscriptions on the platform.
"We’re thrilled to partner with Oaktree Acquisition Corp. to usher Hims & Hers into our next phase of growth as we work to become the front door to the healthcare system, serving as the first stop for peoples’ health and wellness needs across hundreds of conditions,” said Andrew Dudum, CEO and founder of Hims & Hers.
"Hims & Hers was founded to make it easier and more affordable for everyone to get the healthcare they need. We remain committed to advancing that goal as we expand into new categories of care and build an enduring healthcare company that brings choice, affordability and access to consumers," Dudum said.
Oaktree Acquisition Corp. was founded "to partner with a high quality, growing company that will benefit from a public currency for its next leg of growth,” said Patrick McCaney, CEO of Oaktree Acquisition Corp.
Hims & Hers "represents a unique opportunity to invest in a rapidly-growing company that is modernizing the delivery and accessibility of healthcare and wellness solutions," said McCaney.
"Over the past two years, the Company has experienced significant growth bolstered by the continuing widespread adoption of telehealth and digital patient care solutions—and we think this is just the beginning. We look forward to partnering with Hims & Hers to accelerate the expansion of its high-quality, end-to-end care services across the broader healthcare marketplace," McCaney said.
The company's valuation of $1.6 billion equals 8.9 times estimated 2021 revenue and 12.2 times estimated 2021 gross profit, the company said.
As part of the deal, Hims & Hers’ current management and existing equity holders, including McKesson Ventures and Thrive Capital, will roll 100% of their shares into the combined company.
Current Hims & Hers equity holders will own approximately 84%, Oaktree Acquisition Corp. shareholders will own approximately 12% and PIPE investors will own approximately 4% of the issued and outstanding shares of common stock, respectively, of the combined company at closing.
Dudum will retain 90% of voting power following the deal, according to documents filed with the Securities and Exchange Commission on Wednesday
The transaction is expected to close in the fourth quarter of 2020.