Healthcare Services Group (HCSG.O): A Few Thoughts on the NEXDINE Deal

This report provides UBS's additional color on Healthcare Services Group's (HCSG.US) deal to acquire NEXDINE Hospitality. Before the market open on October 7th, HCSG announced a deal to acquire NEXDINE, a privately held leader in dining and hospitality service management, with potential additional contingent consideration upon achievement of certain performance targets. The deal is funded with cash on hand, and HCSG expects it to add over US$150 mln in annual revenues. NEXDINE's margin profile was said to be similar to HCSG's existing dining operations (i.e. MSD-HSD). HCSG said it did not target specific synergies, instead wanting to give NEXDINE backing and infrastructure support to accelerate growth, and it does not expect to rationalize the workforce. The company may provide details on accretion/dilution on its 3Q earnings call next week. NEXDINE primarily operates within the senior living space, with more than 30K facilities in the U.S., a diversified customer base and a geographic