Ethema Health Corporation (OTCQB: GRST) has reversed course on its plan to acquire Addiction Recovery Care LLC, terminating its letter of intent (LOI).
Florida-based Ethema Health, a provider of behavioral health and substance use disorder (SUD) services, previously disclosed its acquisition venture in late October. The plan was for Kentucky-based Addiction Recovery Care to be absorbed into a subsidiary of Ethema Health.
Together, their combined operating revenue could have topped $100 million. But by Dec. 31, both parties had “mutually” terminated the agreement, according to a press release.
Details about the decision to terminate the agreement were not released.
Executives at Addiction Recovery Care were contacted for further clarification on the termination of the deal, but a spokesperson told Behavioral Health Business they “don’t have any further comments at this time.”
BHB is still awaiting a response from Ethema Health.
Originally, the transaction was touted as a move to consolidate services in the addiction treatment space and make good on Ethema’s goal of “growing to approximately 3,000 beds,” Shawn Leon, Ethema Health’s CEO, previously told BHB. With the acquisition, it would have added between 1,500 to 2,000 beds, he said at the time.
Despite terminating the transaction, Leon said it still expects growth for the year ahead.
“We look forward to the year ahead and expect to continue growing our businesses in Florida and Kentucky and to continue serving our clients and the communities we operate in,” Leon said in a statement.
Now, Ethema Health’s 2026 growth will likely stem from its “list of other providers that we know that can easily get us to our goal,” Leon previously told BHB that it had also been looking at. The company has consistently utilized real estate sales and leaseback transactions to finance operations.
Addiction Recovery Care has been under FBI scrutiny for health care fraud in recent years, with the agency actively seeking information regarding its investigation as recently as July 2024. Although the company has not been charged criminally, the case is still open. The company had also closed five locations and laid off dozens of employees in September, right before the deal with Ethema Health was announced.
Following the initial acquisition announcement, Tim Robinson, CEO of Addiction Recovery Care, acknowledged this and said the company would “look forward to getting through a challenging year, and we believe that the proposed transaction will help put this behind us.”