CloudMD to acquire VC-backed MindBeacon for C$116m

Vancouver-based healthcare technology company CloudMD Software & Services has agreed to acquire MindBeacon, a Toronto-based digital mental healthcare platform.

Vancouver-based healthcare technology company CloudMD Software & Services has agreed to acquire MindBeacon, a Toronto-based digital mental healthcare platform. The cash-and-stock deal is valued at about C$116 million. MindBeacon, which went public last year, has raised venture capital funding from Elkland Capital, Green Shield Canada, Manulife, Strauss Interests, Telus Ventures and others.

PRESS RELEASE

VANCOUVER, BC and TORONTO, Nov. 15, 2021 /CNW/ – CloudMD Software & Services Inc. (TSXV: DOC) (OTCQB: DOCRF) (Frankfurt: 6PH) (“CloudMD”) and MindBeacon Holdings Inc. (TSX: MBCN) (“MindBeacon”), jointly announce they have entered into a definitive arrangement agreement (the “Arrangement Agreement”) under which CloudMD will acquire all of MindBeacon’s issued and outstanding common shares for a combination of cash and shares valued at approximately $116 million. Under the terms of the Arrangement Agreement, each common share of MindBeacon will be exchanged for $1.22 of cash and 2.285 common shares of CloudMD (the “Exchange Ratio”). The implied offer price of $4.78 and premium of 49% is based on the 7-day volume weighted average price (“VWAP”) of the common shares of MindBeacon as of November 12, 2021.

MindBeacon is a leading digital mental healthcare platform that provides a continuum of care, focusing on iCBT, which is an effective therapy provided through a computer or a mobile device. iCBT has become a fast-growing intervention channel compared to conventional psychotherapy. MindBeacon’s platform provides a cost-effective, stigma-reducing avenue to deliver mental health therapy that complements CloudMD’s holistic, integrated offering. MindBeacon has established relationships across a broad spectrum of B2C and B2B distribution channels, including healthcare providers, employers and governments. MindBeacon delivers positive outcomes, with 82% of iCBT clients reporting self-improvement in mental health, and 67% reporting clinically significant improvement.

The addition of MindBeacon to CloudMD is expected to be immediately synergistic for a number of key reasons:
Combined digital health platform expected to be one of North America’s leading fully-integrated health offerings, with a clinically-validated, broad continuum of care to address mild, moderate, acute and chronic mental and physical care.

MindBeacon’s mental health services will be integrated into CloudMD’s Comprehensive Integrated Health Services Platform, which is expected to amplify the reach and expand the breadth of interactive technologies and tool sets within behavioural health to support clients with longitudinal multi-dimensional care, and data interoperability is expected to provide additional data around healthcare outcomes and improve network effects.
Significant cross selling opportunities through a combined network of 5,500 corporate clients, over 5 million lives, and extensive government contracts.

Drives U.S. expansion potential through additional capabilities, modalities, cross selling synergies and MindBeacon’s recent acquisition of a U.S.-based mental health provider.
Leverage CloudMD’s Digital Health Services division and network of over 20,000 regulated healthcare professionals to promote MindBeacon’s “Beacon in a Box” white label iCBT SaaS offering.

On a consolidated basis, CloudMD expected to have an annualized revenue run rate of $185 million and gross margin of approximately 35%.

Identified immediate cost synergies exceeding $2 million.

“We continue to rapidly execute on our product roadmap through strategic acquisitions to build a leading North American healthcare and wellness offering. MindBeacon’s mental health services and iCBT platform adds another important capability to our robust healthcare ecosystem and further positions us with a leading, clinically-validated mental health solution,” said Dr. Essam Hamza, CEO of CloudMD. “Our proprietary, integrated end-to-end healthcare offering focuses on whole-person care that addresses the comorbidities between mental and physical care. By uniting traditionally siloed care, we are able to better leverage data to inform and provide improved patient outcomes. As a doctor, I’m heartened by the fact that we are realizing one of CloudMD’s founding principals of have a full tech-enabled patient-centric ecosystem that is already demonstrating measurable improved outcomes for patients.”

Karen Adams, President of CloudMD further commented, “Mental health and the variety of treatments available represent a large market and access to care is a global concern. It is widely recognized that obtaining assessment and coordinated care supports access to care. CloudMD has developed a comprehensive health and wellness platform focused on health outcomes that provides access to treatment options from subclinical to clinical mental health needs and acquiring a leading iCBT platform helps provide a spectrum of treatment options. MindBeacon’s iCBT is synergistic to our patented, Comprehensive Integrated Health Services Platform and our EFAP HumanaCare program that is available throughout North America. This will give users the ability to utilize iCBT, will encourage engagement by reducing stigma based on the discreet nature of iCBT and ultimately will create a more efficient, valuable solution for patients, providers, payors, and governments.”

“The need for mental health treatment is accelerating daily. Further, its impact on physical health and chronic conditions is also well known. Unfortunately, traditional methods of care are ineffective due to restrictive access, exorbitant costs, and ingrained stigma. Governments and employers are looking for an end-to-end solution that treats the whole person,” said Dan Clark, CEO of MindBeacon. “MindBeacon’s proven effectiveness in leveraging technology, data science and personalized, multi-modal treatment to improve mental health outcomes has set us apart. Now, combined with CloudMD’s, end-to-end, whole-person care, our integrated solutions are truly unique and world-class. I’m excited about our future together and believe CloudMD is the ideal partner for our collective patients, customers and shareholders.”

Terms of the Transaction
CloudMD will acquire 100% of the issued and outstanding common shares of MindBeacon, including its cash on hand of $53.9 million as at September 30, 2021. The total transaction consideration is comprised of approximately $29.5 million in cash and 55.5 million common shares of CloudMD. Under the terms of the Arrangement Agreement, each common share of MindBeacon will be exchanged for $1.22 of cash plus 2.285 common shares of CloudMD. Based on the 7-day VWAP of the common shares of CloudMD as at November 12, 2021, the implied purchase price is approximately $116 million or $4.78 per share. The offer price represents a premium of 49% to MindBeacon’s 7-day VWAP as at November 12, 2021.
The transaction will be carried out by way of a court-approved plan of arrangement under the Canada Business Corporations Act. On completion of the transaction, shareholders of MindBeacon will hold approximately 18.8% of pro forma CloudMD.

Completion of the transaction is subject to a number of customary conditions, including approval by at least two-thirds of the votes cast at a special meeting of MindBeacon shareholders. In addition to shareholder and court approvals, the transaction is also subject to the satisfaction of certain other closing conditions customary in transactions of this nature, including TSX Venture Exchange approval. The transaction is not subject to any financing condition. The Arrangement Agreement contains customary provisions, including non-solicitation, “fiduciary out” and “right to match” provisions, as well as a $4.1 million termination fee payable to CloudMD under certain circumstances. The Arrangement Agreement, which describes the full particulars of the transaction, will be made available on SEDAR under the issuer profiles of CloudMD and MindBeacon at www.sedar.com.

TD Securities Inc. has provided an opinion to the Board of Directors of MindBeacon to the effect that, as of the date thereof, and based upon and subject to the assumptions, limitations and qualifications set out in such opinion, the consideration to be received by MindBeacon shareholders under the transaction is fair, from a financial point of view, to such shareholders.

The transaction has been unanimously approved by the Boards of Directors of both companies. MindBeacon’s Board of Directors unanimously recommends that MindBeacon shareholders vote in favour of the transaction.

The directors, officers and certain shareholders of MindBeacon, collectively holding approximately 28% of its issued and outstanding common shares, have entered into voting support agreements under which they have agreed to support and vote in favour of the transaction.

Echelon Capital Markets is acting as an exclusive financial advisor to CloudMD in connection with the transaction. Cassels Brock & Blackwell LLP is acting as a legal advisor to CloudMD. TD Securities Inc. is acting as a financial advisor to MindBeacon, and Credit Suisse is acting as a strategic advisor to MindBeacon, each in connection with the transaction. Osler, Hoskin & Harcourt LLP is acting as a legal advisor to MindBeacon.

Full details of the transaction will be included in the MindBeacon information circular, which is expected to be mailed to shareholders and made available on SEDAR under the issuer profile of MindBeacon at www.sedar.com in due course. The shareholder meeting is expected to be held in January 2022 and the transaction is expected to close shortly thereafter.