Vancouver-based healthtech company CloudMD has entered into an agreement to be taken private by Toronto-based private equity firm CPS Capital.
CEO Karen Adams said the transaction will provide CloudMD with much-needed capital to execute on future initiatives to sustain and grow the business.
CloudMD said the transaction is a result of a strategic and liquidity review the company has been performing since July 2023. The company faced liquidity issues due to its large number of acquisitions over the past four years. As a result, it was unable to generate positive cash flow while making debt repayments or find “reasonable” refinancing options.
At the end of April, the Toronto Venture Stock Exchange (TSXV)-listed company announced it would miss the deadline to file its Q4 2023 earnings as a result of its strategic and liquidity review, which it was performing with the assistance of merger and acquisition advisory firm INFOR Financial.
The transaction will see CPS acquire all of CloudMD’s outstanding common shares for $0.04 CAD each, paying out around $12 million to shareholders. CPS Capital partner Mike Arblaster told BetaKit that with CloudMD’s “multiple layers of debt and cash flow needs,” the deal is valued closer to $36 million. CPS is funding the transaction through a combination of equity from its new fund, CPS Partners Fund V, and its previous fund, CPS Partners Fund IV.
CloudMD said it has also received a $1-million secured bridge loan from CPS as well as a $2-million line of credit from its existing credit facilities to support its liquidity needs prior to the transaction closing. The transaction is expected to be put in front of voting shareholders by the end of June.
CloudMD CEO Karen Adams said the transaction will provide the company with much-needed capital to execute on future initiatives to sustain and grow the business.
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“We are confident that the transaction will provide the required liquidity and support to enable CloudMD to achieve its strategic vision,”Arblaster said in a statement. “We look forward to partnering with the CloudMD team to build on the strength of their capabilities and create new opportunities for the Company and its employees to thrive and grow.”
Founded in 2013, CloudMD delivers hybrid primary care, specialist care, telemedicine, mental health support, healthcare navigation, and educational resources through its Kii platform. Its founder, Dr. Essam Hamza, stepped down from the company in May 2022 after acquiring Toronto healthtech company MindBeacon for approximately $116 million CAD.
Adams stepped into the CEO role on an interim basis before officially taking on the job in August 2022, where she noted that CloudMD experienced “tremendous growth” through numerous acquisitions and that the company was to turn its attention to “rationalizing and operationalizing these assets.”
CloudMD is the latest to join a growing list of Canadian tech companies that have opted to go private in the last year. In April, Montréal payments company Nuvei entered into a $6.4-billion agreement to be privatized by an American private equity firm. Prior to that, many others opted to go private including MDF Commerce, TrueContext, Q4 Inc., BBTV Holdings, and Dialogue Health Technologies.
UPDATE (05/16/24): This story has been updated to clarify that the $12 million figure is the payout to shareholders, with an update to the full transaction figure provided to BetaKit by CPS Capital partner Mike Arblaster.
Feature image courtesy of Pixabay.
