Is Rotech looking to go private?

Monday, August 8, 2011

ORLANDO, Fla. – Rotech Healthcare appears to be on a roll, even attracting the attention of private investors.

"They seem to be getting it together," said Bob Leonard, an analyst with The Braff Group in Pittsburgh. "They are a decent sized player and they are performing pretty well."

Separate Securities and Exchange Commission (SEC) filings in June and July show that two private equity firms each own a small share of Rotech's common stock: Robecco Investment Management owns 7.15%, while Wynnefield Capital owns 6.6%.

Is the company seeking to go private?

"That wouldn't surprise me," said Jonathan Sadock, partner and CEO of Paragon Ventures, a Philadelphia-based M&A firm. "(Investors) are starting to get on top of what's happening here. The government is driving consolidation, especially as it relates to Medicare."

In fact, Rotech has reportedly been on the acquisition trail, say analysts.

"I know they have been aggressively buying if the terms were right," said Bruce Burns, president of Affinity Ventures in Albuquerque, N.M. "They are definitely trying to turn themselves around and I am assuming they have a good plan."

With 17 contracts in hand from Round 1 of competitive bidding, Rotech is going to need to build scale if it is to succeed, say analysts.

"The (question) that brings is, 'Can they scale existing infrastructure?'" Sadock said. "The scale isn't going to make up for all of it, but it will make up for some, and that's enough to keep investment in the industry."