Stout Advises on Sale of Western Drug Medical Supply to SG Homecare

Stout announced today that its client, Western Drug Medical Supply, has been acquired by SG Homecare, a portfolio company owned by Sverica Capital. Sverica Capital is a Boston-based private equity firm specializing in acquiring founder-owned businesses in the lower middle market. Stout served as exclusive financial advisor to Western Drug in connection with this transaction.

Founded by Jack Youredjian in 1977 and headquartered in Glendale, California, Western Drug Medical Supply is a leading supplier of durable medical equipment (DME) and single-use medical supplies to the home care market in California. Its product offering includes respiratory therapy equipment, incontinence supplies, wound care supplies, diabetes supplies, enteral nutrition (pharmacy services), rehabilitation equipment (mobility solutions such as wheelchairs), and hospital beds and other patient room equipment. Approximately 70% of revenue is derived from fee for service contracts with insurance payors in California, while the remaining 30% is earned under capitation (risk bearing) contracts.

Western Drug has contracts with hundreds of the leading payors across California and is a major provider to commercial and Medicaid plans. The company is expected to continue to benefit from an expanding geographic coverage, hospitals discharging more and more patients into the lower cost home setting, and growth in the Medicaid ranks in California and adjacent states, including Arizona and Nevada.

“Stout ran a very effective process that targeted the right strategic and private equity buyers in our industry, which culminated in our decision to select Sverica Capital-owned SG Homecare as our partner. Stout was also extremely helpful in guiding our strategy around the sale of our DME and closed-door pharmacy businesses as well as our legacy retail pharmacy businesses,” said Haig Youredjian, CEO of Western Drug. “We look forward to working with Gregg Osenkowski and the team at Sverica as well as Jay Wendt and the management at SG Homecare. SG is very complementary to our business from a product, payor, and geographic perspective, and the synergies between our two businesses are exceptional.”

“This acquisition puts the combined company in a position to bid for and service larger payor and health system contracts across California given the expanded geographic distribution center footprint, and they will achieve greater buying power with their vendors,” said John Calcagnini, Managing Director at Stout Capital, who led the deal team. “Western Drug also offers pharmacy services that were not offered by SG, while SG has an Orthotics & Prosthetics business that Western Drug can market. The integration of these two companies makes a ton of sense in our view. SG’s acquisition of Western Drug creates one of the largest independent durable medical equipment distributors in the Western United States.”

Stout’s Max Halsted, Natalie Walgren, and Evan Theros assisted in executing the deal.

Jeffer Mangels Butler & Mitchell LLP served as M&A counsel, and Epstein Becker Green served as regulatory counsel to Western Drug. McGuireWoods LLP served as legal counsel to Sverica.

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