Option Care buyout: why the Nov. 4 results matter to lenders
Option Care stock closed Oct. 6 at $31.00, 3.4% under the $32.05 cash price, so shareholders are pricing completion. The Nov. 4 release, which comes without a call, is what the debt market gets to read.
Option Care Health closed Tuesday at $31.00 on Nasdaq, $1.05 below the $32.05 cash price in its buyout agreement, in the 4:00 p.m. Eastern close. The spread is 3.4% for a transaction targeted to close in the first half of 2027, so the market is treating completion as close to certain. The stock had closed at $23.37 the day before the announcement, which makes the cash price a 37% premium to that close. Shareholders have been paid for the business they have. The people still underwriting the business Option Care will become are the lenders and the two owners.
The price reconciles to the headline. The 10-Q cover shows 149,785,243 shares, and at $32.05 that is $4.8 billion of equity. Add about $965 million of net debt at June 30, which is $1.159 billion of debt less $193.8 million of cash, and the total is $5.77 billion, matching the $5.8 billion enterprise value in the joint release. Buyers are paying a premium to take out a company whose earnings are flat.
Option Care's first half revenue grew 1.6% while adjusted EBITDA fell 1.6%, from $225.8 million to $222.3 million, according to the second quarter results release. The second quarter was better, at $117.5 million of adjusted EBITDA and 3% growth, but over the half year revenue growth did not convert into earnings.
The financing was sized against a plan the company has since withdrawn. The July results release guided 2026 adjusted EBITDA to $480 million to $495 million. With $222 million booked in the first half, the back half needed $258 million to $273 million, about 16% to 23% more than the first half delivered. The July outlook for the third quarter was sequential mid single digit growth, which from $117.5 million is roughly $122 million to $125 million. That would leave $133 million to $151 million for the fourth quarter, 13% to 28% above the second. The guidance leaned on the last quarter to carry the year, and the company withdrew it when the deal was announced.
The merger agreement 8-K shows what lenders are asked to carry. It lists $2.873 billion of equity commitments and up to $3.15 billion of term debt, including repayment of existing debt, plus a $500 million revolver, and says closing is not conditioned on financing. At the ceiling, lenders would supply about 52% of the $6.02 billion of equity and term debt, and equity would be the other 48%. Doubling first half adjusted EBITDA gives about $445 million a year, so stand alone net debt is about 2.2 times that today, while the term debt ceiling alone is about seven times. The ceiling is a limit and not a forecast of funded leverage, but the distance between the two ratios is the risk lenders are underwriting.
CD&R takes 51% and control, and McKesson invests $1.4 billion for 49%. That $1.4 billion is 49% of the $2.873 billion of equity commitments, so McKesson pays almost exactly the same price per unit as the control owner. The release also describes a framework for McKesson to acquire CD&R's interest later, subject to conditions and regulatory approvals, but no separate premium for it appears in the arithmetic. McKesson is buying a pro rata stake with a path to control attached, while CD&R carries the operating plan.
The commercial argument for the pairing is real. McKesson says it wants to invest where its capabilities can help care move to lower cost community settings closer to home, and Option Care is a home infusion business. Specialty distribution knowledge could plausibly help it win and serve patients. But the release quantifies no synergy and no operating plan, McKesson accounts for its stake as an equity method investment, and the first half numbers say revenue growth has not yet reached EBITDA. Synergies would have to appear in the P&L before they could change what lenders believe.
The contract terms say who carries the financing risk. The agreement sets a $146 million termination fee on the company and $292 million on the parent, exactly twice as much, and its outside date is Oct. 5, 2027. Against the $4.8 billion equity value, the two fees are about 3% and 6%. Because closing is not conditioned on financing, the larger fee is the parent's exposure if the deal fails. A debt market that turns before the first half of 2027 becomes the buyers' problem, and public shareholders are insulated from it, which is one more reason the stock trades so close to the cash price.
The next report matters more to lenders and owners than to public holders. Option Care will not host a live call for its third quarter results on Nov. 4, so the release and its tables are the whole disclosure. The cash flow statement carries more weight than the headline: second quarter operating cash flow was $184 million against $171 million for the half, which means the first quarter used cash, and a lender needs to see whether that swing reverses.
The Nov. 4 release should show third quarter adjusted EBITDA close to $123 million, in line with the July outlook, for a year to date total near $345 million. If it lands materially under $122 million, the fourth quarter would need at least 15% sequential growth to reach the old plan, and the buyers will have signed for a business that was not going to meet its own targets.