Nurse Next Door Professional Homecare Services Inc. (“Nurse Next Door”) and Diversified Royalty Corp. (TSX:DIV) (“DIV”) have announced a transaction whereby DIV will acquire the trademarks and certain other intellectual property rights utilized by Nurse Next Door in its premium home care business (the “NND Rights”) for a purchase price of $52.0 million. Immediately following the closing of the Acquisition, DIV will license the NND Rights back to Nurse Next Door for 99 years, in exchange for an initial net royalty payment of $4.9 million per annum (the “Royalty”), which will grow contractually at a rate of 2% per annum during the term of the license. In the future, Nurse Next Door may increase the size of the Royalty through exchange of a portion of its indirect retained interest in the NND Rights, and the company will have the right at any time after the seventh anniversary of closing of the transaction to buy back the NND Rights.
Nurse Next Door believes everyone should be able to live at home, and the company provides compassionate service from licensed non-medical caregivers as well as registered nurses to achieve this objective. With over 175 franchise and corporate locations across North America and Australia, Nurse Next Door offers services ranging from companionship, meal preparation and homemaking to home nursing care, as well as around the clock care and end of life care. Favourable North American demographics are expected to drive the need for premium home care services going forward, and Nurse Next Door is well positioned to fulfil seniors’ needs.
Ken Sim, Co-Founder of Nurse Next Door, said, “We are pleased to be able to have reached this agreement with DIV. The proceeds of the royalty transaction will enable Nurse Next Door to accomplish a number of strategic objectives, including consolidating ownership within our existing shareholder group, while retaining significant operational and financial flexibility. We will continue to invest in our systems to accelerate franchise partner growth and deliver our unique concept of Happier AgingTM to more seniors around the world.”
Sean Morrison, President and Chief Executive Officer of DIV, stated, “The Nurse Next Door transaction adds a fifth royalty stream to DIV’s portfolio, representing approximately 13% of DIV’s pro-forma adjusted royalty revenue and is another step in our strategy of purchasing royalties from a diverse group of proven multi-location businesses and franchisors. Nurse Next Door is one of the leading North American brands in the premium home health care market, with an 18-year operating history, proven franchisee economics, strong and growing cash flows, a centralized technology-enabled services platform and call center, and an experienced leadership team. DIV believes the Nurse Next Door royalty is of superior quality given the competitive strength of the underlying business, strong secular industry trends and demographics, the high royalty coverage and the fixed 2% growth rate.”
The transactions are expected to close in November.
Fort Capital advised Nurse Next Door on the exploration of a full range of alternatives intended to provide liquidity for shareholders while retaining significant financial and operational flexibility going forward, including negotiation of the NND Rights and Royalty transactions.