CRC acquired by Acadia for $1.18 billion

November 3, 2014

‘This combined company will offer an unprecedented platform of programs and services in behavioral health care and addiction services.’
-- Jerry Rhodes

Acadia Healthcare Company has made its biggest acquisition in the substance use disorder treatment field yet: on October 29, CRC Health Group announced that it has entered into a definitive agreement to be acquired by Acadia Healthcare Company. CRC Health Group has more than 140 programs treating 44,000 patients per day. The combined company will be one of the largest in the behavioral health care field. Acadia specializes in inpatient treatment; CRC Health Group has many facilities offering a comprehensive array of treatment services, including opioid treatment programs. CRC was previously owned by Bain Capital, which was rumored to be preparing to sell last winter.

“We are very excited about this acquisition and the opportunity it affords both Acadia and CRC,” CRC CEO Jerry Rhodes told ADAW in an October 30 email. “This combined company will offer an unprecedented platform of programs and services in behavioral health care and addiction services,” he said. “This will also enhance our company’s ability to promote the opportunities under the Affordable Care Act and the Mental Health Parity and Addiction Equity Act.”

“We expect our combination with CRC to be a great transaction for both Acadia and CRC,” said Joey Jacobs, chairman and chief executive officer of Acadia, in an official statement. “We believe the addiction treatment markets that CRC serves represent a very meaningful and accretive growth opportunity. As a well-established market leader, CRC will provide Acadia with an out- standing platform for growth in this fragmented market. We further expect to support CRC in taking advantage of additional growth opportunities through both our access to capital and the expertise evident in the successful long-term growth record of Acadia’s management team.”

Under the terms of the deal, which is expected to be finalized by early next year, pending regulatory approval, CRC Health’s owners will receive about 6.3 million Acadia shares, according to Acadia, which said it will also assume CRC Health’s debt.

Acadia has acquired 27 facilities and more than 1,500 beds in the last year.

Closing treatment gap

Weiner said that Acadia, as a behavioral health care provider, is even more likely than Bain to put money into its facilities. “If Acadia smartly expands patient care and facilities, they will continue to go a long way to addressing the nation’s 20-plusmillion treatment gap,” said Bob Weiner, former spokesman for CRC Health Group. “CRC has led the field in successful development from one to 140-plus facilities over the past 15 years at a time of economic downturn because of the innovations and financial wizardry of founder Barry Karlin and co-organizer/final CEO Jerry Rhodes, who knows the national health and treatment field cold,” added Weiner, who is also former spokesman for the White House Office of National Drug Control Policy. “Let’s hope Acadia maintains the comprehensive science-based model for patients and understands that 100-percent success is not an option, but help for the vast majority of clients can remain a reality,” he told ADAW. “Then they can remain and expand on CRC’s legacy of having become the world’s largest provider of behavioral treatment services.”

Weiner noted that Karlin put in about $20 million for CRC, sold to Bain for about $700 million, and now Rhodes, McCaffrey, other board members and Bain “get their piece of $1.18 billion.”

According to Acadia, CRC facilities are expected to generate $450 million this year, with an adjusted earnings of $115 million. Acadia has 76 facilities and 5,800 licensed beds.

Publicly-traded Acadia gained 2.1 percent on October 29; the stock has increased 34 percent in the past year.