DEFA14A: Neuronetics to Acquire Greenbrook TMS in All-Stock Transaction, Aiming for Enhanced Mental Health Treatment

Neuronetics, Inc. will acquire Greenbrook TMS Inc. in an all-stock transaction, combining two major mental health companies to expand treatment access and achieve cost synergies.

Summary

• Neuronetics, Inc. and Greenbrook TMS Inc. have agreed to an all-stock transaction where Neuronetics will acquire Greenbrook.
• The deal aims to create a larger, vertically integrated organization focused on mental health treatment.
• Under the agreement, Greenbrook's outstanding long-term debt will be converted into common shares before the deal closes.
• Each Greenbrook share is expected to convert into 0.01149 of a share of Neuronetics common stock, subject to potential adjustments.
• Post-transaction, Neuronetics shareholders will own approximately 57% and Greenbrook shareholders 43% of the combined company.
• The combined entity will operate as Neuronetics, Inc. under the ticker STIM on the Nasdaq Global Market.
• The acquisition is expected to close in the fourth quarter of 2024, pending shareholder and regulatory approvals.
• The combined company anticipates achieving approximately $15 million in annual cost savings, with an accelerated path to Adjusted EBITDA and cash flow positivity by fiscal year 2025, excluding one-time transaction costs.
• Neuronetics projects standalone 2024 revenue of ~$71.3 million, while the combined entity is estimated to reach ~$180 million in 2025 and ~$210 million in 2026.
• Standalone Neuronetics projects a net loss of ~$31 million in 2024, with the combined entity aiming for a net loss of ~$13 million in 2025 and a net income of ~$5 million in 2026.
• Adjusted EBITDA for standalone Neuronetics is projected at ~($14) million in 2024, with the combined entity targeting ~$6 million in 2025 and ~$23 million in 2026.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for the combined company, with projected revenue growth, cost savings, and an accelerated path to profitability. However, it also acknowledges risks and uncertainties associated with the transaction, warranting a moderately positive sentiment.

Positives

• The acquisition creates a vertically integrated organization with significant scale in the U.S. mental health market.
• The combined company is expected to benefit from increased brand awareness for NeuroStar.
• The deal is projected to result in material cost synergies of $15 million annually.
• The acquisition is expected to accelerate the path to profitability and cash flow positivity.
• The combined company will have a stronger balance sheet and greater financial flexibility.
• Greenbrook's platform provides access to patient referrals who have not responded to medication.
• The combined company can offer additional centralized services to all customers, including payor contract negotiations and reimbursement processing.
• The Better Me platform can be leveraged to better operationalize Greenbrook clinics and serve as a model for best practices across all customers.

Negatives

• The transaction is subject to customary closing conditions, including shareholder and regulatory approvals, which introduces uncertainty.
• The projections and estimates are based on assumptions that may not be accurate.
• There is no assurance that the proposed arrangement will close or that the forward-looking information will prove to be accurate.
• Standalone Neuronetics is pursuing opportunities to reduce its operating expenses, which could result in reduced revenue, Adjusted EBITDA and net income.

Risks

• The inherent uncertainty associated with financial projections and outlooks.
• Neuronetics' ability to maintain Nasdaq listing requirements.
• General economic conditions in the markets where Neuronetics and Greenbrook operate.
• The expected timing of regulatory approvals.
• The non-performance of third-party vendors and contractors.
• The combined company's ability to successfully sell its products and the market reception to its products.
• The combined company's ability to manage growth and obtain additional financing.
• The combined company's ability to compete with others in its industry and protect its intellectual property.
• The retention of employees of Greenbrook and Neuronetics following the announcement of the Arrangement.
• The outcome of any legal proceedings related to the Arrangement Agreement.
• The fact that the trading price of the Greenbrook Shares or the Neuronetics Shares may decline significantly if the Arrangement is not completed.

Future Outlook

The combined company expects an accelerated path to Adjusted EBITDA and cash flow positive for the full fiscal year 2025, excluding one-time costs related to the transaction. They also anticipate increased revenue scale and a stronger balance sheet.

Industry Context

The acquisition reflects a trend towards consolidation in the mental health treatment industry, aiming to create larger, more efficient organizations capable of reaching a broader patient base and leveraging economies of scale.

Comparison to Industry Standards

• It is difficult to compare the results to industry standards without specific benchmarks for TMS therapy providers.
• However, the focus on achieving Adjusted EBITDA and cash flow positivity aligns with industry expectations for sustainable growth.
• The projected revenue growth for the combined entity suggests a competitive position in the market.
• Key competitors include other TMS providers and companies offering alternative mental health treatments.

Stakeholder Impact

• Shareholders of both Neuronetics and Greenbrook will be impacted by the transaction, with changes in ownership and potential value.
• Employees of both companies may experience changes in roles and responsibilities as a result of the integration.
• Customers of both companies are expected to benefit from expanded services and improved treatment options.
• The combined company's creditors will be impacted by the stronger balance sheet and improved financial flexibility.

Next Steps

• Obtain approval from Neuronetics and Greenbrook TMS shareholders.
• Satisfy customary closing conditions.
• Close the transaction, anticipated in the fourth quarter of 2024.
• Integrate Greenbrook's operations into Neuronetics.
• Realize cost synergies and revenue opportunities.
• Leverage the Better Me platform across the combined organization.

Key Dates

Keywords

Neuronetics, Greenbrook TMS, Acquisition, Mental Health, TMS, NeuroStar, Merger, EBITDA, Revenue, Synergies