Ethema Health Corporation Signs LOI to Acquire Addiction Recovery Care Assets in Kentucky

Ethema Health Corporation has entered into a Letter of Intent to purchase certain assets and entities operating under the Addiction Recovery Care brand in Kentucky. The acquisition includes ARC's in-patient facilities located in Inez, Pikeville, Owensboro, and Ashland, along with out-patient facilities operating in Prestonsburg, Mount Sterling, Louisa, Ashland, and Lexington. The transaction also encompasses separate entities including a psychiatric hospital, pharmacy, medical laboratory, and rural health clinic, collectively representing approximately 900 patient beds across the addiction treatment and psychiatric facilities.

The purchase will be financed through a structured approach involving approximately 25% cash, 25% vendor note, and 50% equity-linked funding from the vendor. The cash portion will be raised through new equity issuance and proceeds from sale-leaseback transactions involving certain ARC facilities. Ethema has previously utilized similar real estate financing strategies for its Florida operations in 2023, demonstrating the company's experience with this funding model.

Ethema will establish a new entity called NewcoARIA to acquire the ARC assets and separate entities, which will ultimately also house the company's existing Florida and Kentucky treatment operations. The new entity will be initially owned by Ethema, new investors, and the vendor, with plans to pursue an Initial Public Offering of NewcoARIA on a senior U.S. exchange. This structural approach is designed to simplify the substantial acquisition while maintaining clear equity and debt separation from Ethema's existing operations.

The combined revenue projections underscore the transaction's significance. Ethema's existing Florida and Kentucky entities are forecast to generate approximately $25 million in revenue for 2026, while the acquired ARC assets and separate entities are projected to contribute over $100 million during the same period. This substantial revenue increase positions the combined entity as a major player in the behavioral healthcare sector.

Shawn Leon, Ethema CEO, emphasized that discussions leading to the LOI signing began in January 2025. The strategic rationale centers on combining ARC's assets with Ethema's existing ARIA Kentucky operations under the ARIA brand to create a comprehensive statewide treatment network. This consolidation aims to not only service the entire state but also influence the future direction of addiction treatment in Kentucky. Leon further committed to implementing Ethema's operating philosophy and procedures within NewcoARIA, prioritizing safety and compliance as guiding principles for client care.

Tim Robinson, CEO of ARC, expressed confidence that combining assets with ARIA would best serve both clients and staff while maintaining commitment to the ARC mission under the ARIA umbrella. Robinson noted that the proposed transaction could help the organization move past a challenging year, suggesting the acquisition may provide stability and growth opportunities for ARC's operations. The transaction represents a significant development in the behavioral healthcare landscape, potentially creating one of Kentucky's most comprehensive addiction treatment networks while demonstrating continued consolidation trends within the healthcare sector.