Air Methods Corp., already a huge presence in the emergency air ambulance service industry, has just announced that, with the recent approval given to them by the Federal Trade Commission, they will be acquiring OF Air Holdings Corporation and its subsidiaries sooner than had been expected. They are ending the federally-required antitrust waiting period earlier than the 30 days that are normally required.
This deal between two of the biggest providers of air medical transport marks one of the most significant mergers/acquisitions in the history of the aeromedical industry.
The full transaction is expected to be completed by tomorrow (August 1). This estimate, of course, is merely based upon the current expectations of both parties. Occasionally, these type of large business acquisitions can take longer than anticipated, especially if problems are encountered. Earlier, according to a June 2, 2011 OmniFlight press release, this same transaction was expected to close in July.
The aggregate purchase price of Omniflight will total $200 million in cash on a cash-free, debt-free basis, subject to working capital and other adjustments as provided in the Agreement, with Omniflight going on to become a wholly-owned unit of Air Methods Corp after the closing. Omniflight will maintain its brand despite becoming a subsidiary of a larger air ambulance service. The acquisition deal was roundly approved by the board members of both companies earlier this year.
Almost 33% More Aircraft
Air Methods’ fleet currently features over 300 helicopters and fixed-wing aircraft. The acquisition of OmniFlight Helicopters will bolster this number significantly – almost 33%, in fact – based on OmniFlight’s current fleet of 95 aircraft (86 helicopters and 9 fixed-wing aircraft). The average age of those aircraft is approximately 11 to 12 years.
On July 20, Air Methods, who will be announcing their Q2 earnings on August 4, had warned that their second-quarter earnings would be roughly 25% lower than the second-quarter earnings for 2010. Despite this fair warning to investors and market analysts, the stock price has yet to change significantly – only falling by $3.00 between July 20 and July 28.
OmniFlight Helicopters will soon become a fully-owned subsidiary of Air Methods Corp after an agreement between the boards of both companies following a $200 million acquisition.
Air Methods’ drop in estimated earnings could be expected based on the high fixed cost of maintaining their large fleet of aircraft, in addition to other fixed expenses. One of these “other” expenses includes the high cost of keeping up a large number of aircraft bases, even when their air ambulances are not flying.
“Fair Weather” Ahead?
According to Forbes, Air Methods raised the price for its air ambulance services by 18% last year. The company generates a large part of its income via emergency 911 calls, which are projected to be up this year compared to 2010. Some bullish analysts are expecting higher earnings than in 2010 because of this and other factors related to the slowly-improving “fair weather” conditions in the stock market.
Despite the current rash of worries about the performance of investments in today’s market, it’s fairly easy to find healthcare/medical equipment companies whose stock prices are up considerably compared to 2004-2006 with just a small amount of research. Regardless, any air ambulance service’s stock performance is difficult to estimate at this point, and these type of projections based on varied “good weather” and “bad weather” predictions by various healthcare industry market analysts – educated guesses though they may be – are certainly not definite in any way.
Growth in the Air Ambulance Service Industry
The air ambulance service/transport sector, much like other health care service and medical equipment companies in general, has been experiencing modest but steady growth for some time now. The time-tested theory that there will always be a need for quality healthcare in the world applies to the safe transportation of critical-care patients to that quality healthcare as well.
Past years have been the emergence of many new players in the air ambulance arena catering to various service areas and levels of service, with some air ambulance services sticking to the area of emergency care and others offering more amenities for patients who are willing to pay for a more comfortable transport. With multiple air ambulances vying for various niches, who knows what the future may hold for patients, air medical transport companies, and investors?
As always, we at Air Ambulance Weekly would like to know your thoughts on the current state of the Air Ambulance Industry as well as any other issues facing aeromedical transport and healthcare in general. Please leave your comments in the space below.