ATI Physical Therapy to become public through $2.5B FVAC II merger agreement

Fortress Value Acquisition Corp. II, a special purpose acquisition company, and ATI Physical Therapy, a portfolio company of Advent International, announced that they have entered into a definitive merger agreement. Upon closing of the transaction, the combined company will operate as ATI Physical Therapy and remain NYSE-listed under a new ticker symbol. The transaction is expected to close in Q2, subject to approval by FVAC II's stockholders and other customary closing conditions. ATI owns and operates nearly 900 physical therapy clinics across 25 states. The existing management team, led by CEO Labeed Diab, CFO Joe Jordan and COO Ray Wahl, will continue to lead the business, and Advent will remain ATI's largest stockholder. The combined company represents an enterprise value of approximately $2.5B at closing, or 14x 2022 estimated adjusted EBITDA. Cash proceeds raised will consist of FVAC II's cash in trust of $345M and a fully committed common stock PIPE of $300M at $10.00 per share from institutional investors. FVAC II has amended the terms of its founder equity. FVAC II's sponsor will defer 100% of its founder shares in accordance with the following vesting schedule: 33% at $12.00 per share, 33% at $14.00 per share and 33% at $16.00 per share. FVAC II's sponsor will also cancel 50% of private warrants. Advent and other existing common equity holders of ATI, including management, will remain 100% invested following the closing, rolling approximately $1.3B of investment holdings into equity of the combined company. ATI's preferred equity holders, including GCM Grosvenor, who has been a decade-long investor in ATI, will continue to be significant investors and are converting approximately $130M of existing stake into equity of the combined company. Cash proceeds will be used to pay down ATI's existing debt and remaining preferred equity, reducing leverage. Pro forma net debt to adjusted EBITDA ratio is expected to be reduced from 5.2x to 2.1x based on 2022 estimated adjusted EBITDA. ATI common equity holders, ATI preferred equity holders, FVAC II stockholders and PIPE investors are expected to own approximately 63%, 6%, 17% and 14%, respectively, of the outstanding common shares of the combined company immediately following the merger. The boards of both FVAC II and ATI have unanimously approved the proposed business combination, and, following such approval, ATI stockholders adopted the merger agreement. The transaction is expected to be completed in Q2, subject to, among other customary closing conditions, approval by FVAC II stockholders and FVAC II having minimum cash of $472.5M.