Oaktree Acquisition Corporation

Oaktree Acquisition Corporation

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION: Hims, Inc.

IMPLIED ENTERPRISE VALUE: $1.6 billion
ANTICIPATED SYMBOL: HIMS

Oaktree Acquisition Corp. proposes to combine with Hims, Inc. (“Hims & Hers” or the “Company”). Launched in 2017, Hims & Hers has built a proprietary platform that connects consumers to licensed healthcare professionals for care across numerous specialties, including primary care, mental health, sexual health and dermatology, among others. Since its founding, the Company has facilitated more than two million telehealth consultations, enabling greater access to high quality, convenient and affordable care for people in all 50 states. The Company has driven 100%+ compounded annual revenue growth over the last two years and has more than doubled gross margins to 70%+, with revenue that is over 90% recurring in nature.

As of June 2020, Hims & Hers had approximately 260,000 subscriptions on the platform.


TRANSACTION

The business combination values the combined company at an enterprise value of approximately $1.6 billion.  It is expected to deliver up to $280 million of cash to the combined company through the contribution of up to $205 million of cash held in Oaktree Acquisition Corp.’s trust account, and a $75 million concurrent private placement (PIPE) of common stock of the combined company, priced at $10.00 per share, from leading institutional investors, including funds managed by Franklin Templeton and certain Oaktree clients.

The enterprise value equals 8.9x estimated 2021 revenue and 12.2x estimated 2021 gross profit, an attractive valuation relative to telehealth peers despite the Company’s leading growth and margin profile.

As part of the transaction, Hims & Hers’ current management and existing equity holders will roll nearly 100% of their equity into the combined company.

Leading existing institutional backers of the Company including Founders Fund, Forerunner Ventures, IVP, Redpoint Ventures, Thrive Capital, McKesson Ventures, and the Canadian Pension Fund intend to roll 100% of their shares and the transaction agreement provides for up to $75 million of cash consideration at closing to shareholders, at their election.

Assuming no public shareholders of Oaktree Acquisition Corp. exercise their redemption rights and before any potential cash consideration to Hims & Hers shareholders, 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.

Furthermore, the combined company will be capitalized with up to $330 million in cash, including proceeds received from the transaction together with existing cash on Hims & Hers’ balance sheet. The business combination includes a minimum cash closing condition of $200 million, which is calculated as cash delivered from Oaktree Acquisition Corp.’s trust account, plus cash delivered from the PIPE, minus the up to $75 million of cash consideration at closing to shareholders as described above. Hims & Hers intends to continue investing in growth and new product categories to accelerate its goal of becoming the digital front door to the healthcare system.

The transaction is expected to close in the fourth quarter of 2020.


Oaktree transaction summary 10-1-20


PIPE

  • An aggregate of 7,500,000 shares of New Hims Class A Common Stock for a purchase price of $10.00 per share, for aggregate gross proceeds of $75,000,000
  • Investors include: Franklin Templeton and certain Oaktree clients

SPONSOR AGREEMENT

  • Surrender and forfeit 25.0% of the Class B ordinary shares of OAC and private placement warrants of OAC for no consideration and as a contribution to the capital of OAC to be effectuated in connection with the consummation of the Business Combination
  • Waive any adjustment to the conversion ratio set forth in OAC’s amended and restated memorandum and articles of association with respect to the Class B ordinary shares of OAC held by the Sponsor

EARNOUT

  • Each Hims equityholder will receive its applicable portion of the 16 million earn out shares (or equivalent equity award) that will vest in equal thirds if the trading price of New Hims Class A Common Stock is:
    • greater than or equal to $15, $17.50 and $20 for any 10 trading days within any 20-trading day period and will also vest in connection with any Company Sale if the applicable thresholds are met in such Company Sale.

NOTABLE CONDITIONS TO CLOSING

  • The aggregate cash proceeds from OAC’s trust account, together with the proceeds from the PIPE Financing, equaling no less than $200,000,000 (after deducting any amounts paid to OAC shareholders that exercise their redemption rights in connection with the Business Combination)

NOTABLE CONDITIONS TO TERMINATION

  • By either OAC or Hims if the Business Combination is not consummated by March 30, 2021

ADVISORS

  • LionTree Advisors is serving as exclusive financial advisor to Hims & Hers
  • Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP is serving as legal counsel to Hims & Hers
  • Credit Suisse and Deutsche Bank Securities are serving as capital markets advisors and private placement agents to Oaktree Acquisition Corp.
  • Deutsche Bank Securities is acting as financial advisor to Oaktree Acquisition Corp.
  • Kirkland & Ellis LLP is serving as legal counsel to Oaktree Acquisition Corp.

OAKTREE ACQUISITION CORP. MANAGEMENT & BOARD


Executive Officers

Patrick McCaney, 38
Chief Executive Officer & Director

Mr. McCaney has served as portfolio manager for Oaktree’s Value Equities strategy since its inception. Mr. McCaney oversees the analysis, portfolio construction and management of the Value Equities strategy. Since joining Oaktree, he has led more than 40 public and private investments across a variety of sectors. Prior to joining Oaktree, Mr. McCaney spent more than seven years as an investment professional for the Special Situations Group of Goldman, Sachs & Co., where he originated, executed and managed investments of Goldman’s proprietary capital. Mr. McCaney earned a master’s degree in electrical engineering as well as B.S. degrees in electrical engineering and management science from the Massachusetts Institute of Technology.


Alexander Taubman, 32
President 

Mr. Taubman is a managing director within Oaktree’s Value Equities strategy, which he helped launch. Mr. Taubman contributes to the analysis, portfolio construction and management of the Value Equities strategy. He has led public and private investments in consumer, industrial, media, financials and various other sectors. Prior to joining Oaktree in 2014, Mr. Taubman was an investment professional in the Special Situations Group at Goldman, Sachs & Co., where he originated, executed, and managed investments of Goldman’s proprietary capital. Mr. Taubman serves as a Trustee of Heckscher Foundation for Children, as well as the Museum of Contemporary Art Detroit. He earned a B.A. degree in economics from Harvard College, as well as an M.B.A. from Harvard Business School.


Zaid Pardesi
Chief Financial Officer

Mr. Pardesi is a senior vice president within Oaktree’s Value Equities strategy. He has spent his career originating, acquiring and managing middle-market companies in the industrial, consumer, and healthcare sectors, often operating platforms as CFO. Mr. Pardesi joined Oaktree in 2019 from The Cranemere Group, a global holding company, where he was a senior investment professional acquiring middle-market businesses. Prior thereto, Mr. Pardesi was an investor at H.I.G. Capital, where he co-founded and co-led the Chicago office, and at AEA Investors in New York and London. He began his career at Bain & Company. Mr. Pardesi received an M.B.A. from The Wharton School at the University of Pennsylvania, and a B.S. from Northwestern University, where he was a computer engineering and economics double major.


Mathew Pendo, 55
Chief Operating Officer

Mr. Pendo is the Head of Corporate Development and Capital Markets for Oaktree and the Chief Operating Officer of the three Oaktree managed BDC’s: Oaktree Specialty Lending Corporation (NASDAQ: OCSL), Oaktree Strategic Income Corporation (NASDAQ: OCSI) and Oaktree Strategic Income II, Inc. Mr. Pendo joined Oaktree in 2015. His prior experience includes serving as the Chief Investment Officer of the Troubled Asset Relief Program (TARP) of the U.S. Department of the Treasury, where he was honored with the Distinguished Service Award. Mr. Pendo also previously served on the boards of directors of Supervalu Inc. (NYSE: SVU) from 2014 to 2018, and Ally financial (NYSE: ALLY) from 2013 to 2015. Mr. Pendo began his career at Merrill Lynch, where he spent 18 years, starting in their investment banking division before becoming managing director of the technology industry group. Subsequently, Mr. Pendo was a managing director at Barclays Capital, first serving as co-head of U.S. Investment Banking and then co-head of Global Industrials group. Mr. Pendo earned a B.A. degree in economics from Princeton University.


 

Board of Directors

John Frank, 62
Chairman

Mr. Frank is Oaktree’s Vice Chairman, working closely with Howard Marks, Bruce Karsh and Jay Wintrob (Oaktree’s Chief Executive Officer) in managing the firm. Since October 2017, Mr. Frank has also served as the Chairman of the boards of directors of Oaktree Strategic Income Corp. and Oaktree Specialty Lending Corporation. Further, since November 2017, Mr. Frank has served on the board of directors of Chevron Corporation (NYSE: CVX). Mr. Frank joined Oaktree in 2001 as General Counsel and was named Oaktree’s Managing Principal in early 2006, a position which he held for about nine years. As Managing Principal, Mr. Frank was the firm’s principal executive officer and responsible for all aspects of the firm’s management. Prior to joining Oaktree, Mr. Frank was a partner of the Los Angeles law firm of Munger, Tolles & Olson LLP where he managed a number of notable merger and acquisition transactions. While at that firm, he served as primary outside counsel to public- and privately-held corporations and as special counsel to various boards of directors and special board committees. Mr. Frank earned a B.A. degree in history from Wesleyan University and a J.D. from the University of Michigan Law School.


Anthony Grillo, 63
Director

Mr. Grillo has served as a director of Littelfuse, Inc. (NASDAQ:LFUS) since 1991. Mr. Grillo has also served and is currently serving on the boards of directors of NarrativeWave, Inc. since 2017 and WeR.AI, Inc. since February 2018. Mr. Grillo is one of the founders of American Securities Advisors, LLC and affiliates (now known as Ascribe Opportunities Management, LLC), an advisory and private equity investment firm established in 2005. Mr. Grillo served as Managing Director of Ascribe until his retirement in December 2018. From 2001 through 2004, Mr. Grillo served as Senior Managing Director of Evercore Partners, Inc. (NYSE:EVR), an investment banking boutique providing advisory services to multinational corporations on significant mergers, acquisitions, divestitures, restructurings and other strategic corporate transactions, where he founded the restructuring practice for the firm. From 1999 through 2001, Mr. Grillo served as Senior Managing Director of Joseph Littlejohn & Levy, Inc., a private equity firm. From 1991 through 1999, Mr. Grillo was a Senior Managing Director of the Blackstone Group L.P. (NYSE:BX), a private equity firm. Mr. Grillo previously served as a director of GeoKinetics, from 2013 through 2015, and Lumeta Corporation, from 2016 through June 2018. Mr. Grillo holds a B.A. in economics from Rutgers University and an M.B.A. from The Wharton School of the University of Pennsylvania.


Paul Meister, 66
Director

Mr. Meister is co-founder, and since 2008, Chief Executive Officer of Liberty Lane Partners, LLC, a private investment company with diverse investments in healthcare, technology and distribution-related industries, and is Vice Chairman and Co-Founder of Perspecta Trust, a New Hampshire based trust company. Mr. Meister also served as President of MacAndrews & Forbes Incorporated from 2014 to 2018. Previously, Mr. Meister was appointed Executive Vice Chairman of Revlon, Inc. to serve as the principal executive officer on an interim basis when the Chief Executive Officer of Revlon, Inc. resigned in January 2018. Mr. Meister previously served as Chairman and Chief Executive Officer of inVentiv Health, Inc. (now Syneos Health Inc.) (NASDAQ:SYNH), a provider of commercial, consulting and clinical research services to the pharmaceutical and biotech industries, from 2010 until 2014. Mr. Meister was Chairman of Thermo Fisher Scientific Inc. (NYSE:TMO), a scientific instruments equipment and supplies company, from November 2006 until April 2007. He was previously Vice Chairman of Fisher Scientific International, Inc., a predecessor to Thermo Fisher, from 2001 to 2006, and Chief Financial Officer of Fisher Scientific from 1991 to 2001. Prior to Fisher Scientific, Mr. Meister held executive positions with the Henley Group, Wheelabrator Technologies and Abex, Inc. Mr. Meister has served as a director of Scientific Games Corporation (NASDAQ: SGMS), which provides customized, end-to-end solutions to the gaming industry since 2012; and of Quanterix Corporation (NASDAQ:QTRX) since 2013. He also previously served as a director of LKQ Corporation (NASDAQ:LKQ), a distributor of vehicle products, from 1999 until 2018; vTv Therapeutics Inc. (NASDAQ:VTVT), a clinical-stage bio pharmaceutical company, from 2015 until 2018; and Revlon (NYSE:REV) from 2015 to 2018. Mr. Meister is Co-Chair of the University of Michigan’s Life Sciences Institute External Advisory Board and Chair of the Provost’s Advisory Committee. Mr. Meister has an M.B.A. from Northwestern University and a B.A. from the University of Michigan.


Andrea Wong, 52
Director

Ms. Wong serves on the boards of Liberty Media Corporation (NASDAQ:LSXMK), Qurate Retail Group (NASDAQ:QRTEA), Hudson’s Bay Company (TSE:HBC), Hudson Pacific Properties (NYSE:HPP) and Social Capital Hedosophia Holdings (NYSE:IPOA). She is also a Governor of the British Film Institute and a Trustee of the Royal Academy of Arts. Ms. Wong was most recently President, International Production for Sony Pictures Television and President, International for Sony Pictures Entertainment based in London. She oversaw Sony Pictures Television’s 18 overseas production companies, creating nearly 1,300 hours of entertainment around the world each year. Previously, Ms. Wong served as President and CEO of Lifetime Networks where she oversaw the operations of Lifetime Television, Lifetime Movie Network, Lifetime Real Women, and Lifetime Digital, including programming, marketing, advertising sales, affiliate sales, public affairs, business and legal affairs, strategic planning, operations and research. Prior to that, Ms. Wong was Executive Vice President, Alternative Programming, Specials and Late Night at ABC. Ms. Wong graduated from MIT with a degree in electrical engineering and received an M.B.A. from Stanford University. She is a Henry Crown Fellow at the Aspen Institute, serves on the Stanford Graduate School of Business Advisory Council and is a member of the Committee of 100.