Will HIMS complete the Eucalyptus Health acquisition by September 30, 2026?

The MAC carve-out argument is structurally decisive. Standard M&A practice holds that a risk known to both parties at signing — and the DOJ referral was public 10 days before signing — cannot be invoked as a material adverse change post-signing. This means the DOJ's most dangerous application to this deal (Eucalyptus invoking MAC to walk away) is almost certainly unavailable. The base rate for signed telehealth M&A above $500M is ~85-90%. The deal structure — $240M upfront against a $929M cash position — eliminates financing condition risk, which is the single largest cause of signed deal failure in M&A broadly. Australian FIRB rarely blocks telehealth acquisitions on competition grounds; Eucalyptus and HIMS have minimal overlap in the Australian market that would trigger ACCC concerns. The key residual risk is DOJ criminal charges materializing before closing in a way that is sufficiently material that Eucalyptus can argue a non-MAC regulatory out. At ~19% probability of DOJ charges by September 30, and applying a ~50% probability that charges would actually terminate the deal (given the carve-out argument), the incremental DOJ-driven deal-failure probability is roughly 9-10%. Cash deterioration is a second-order risk: HIMS had $929M at year-end 2025, and even aggressive cash burn would leave $500M+ by mid-2026. The upfront $240M is manageable. Primary residual risks are FIRB delay (low probability) and strategic reassessment by incoming management (low probability). Estimate anchors slightly below the 85-90% base rate to reflect idiosyncratic DOJ exposure.

The cross-border regulatory approval pathway requires more granular assessment than simple base rates. Australian FIRB review for foreign acquisitions of Australian healthcare companies has become more stringent under recent policy. A $1.15B US acquisition of an Australian telehealth platform is large enough to trigger a formal FIRB review and potentially a national security or competition screen given telehealth data sensitivity. However, FIRB has never blocked a US-Australian telehealth transaction on competition grounds, and Eucalyptus is not a critical infrastructure asset. The UK CMA concern (Zava overlap) is the more credible regulatory delay risk: HIMS operates Zava in the UK/EU markets where Eucalyptus also operates, creating actual horizontal overlap. A UK CMA phase 1 review is likely and a phase 2 referral, while unlikely, would push closing to late 2026 or early 2027. The September 30 deadline is therefore tighter than management's 'mid-2026' guidance implies: if FIRB or CMA timelines extend, the Sep 30 deadline could be missed even if the deal ultimately closes. Applying a 10-12% probability to regulatory-delay-driven timeline miss. The DOJ factor is weighted as in Run 1. Net probability is 2-3 percentage points below Run 1 to reflect the cross-border regulatory timeline exposure.

The DESTRUCTIVE capital deployment signal, counterintuitively, increases confidence in deal completion. Management demonstrating a pattern of aggressive capital deployment — even during crisis — means they are unlikely to become cautious and walk away from a strategic acquisition. The committee identified this deal as Exhibit A for systematic value destruction during crisis. That framing cuts both ways: yes, the deal may destroy value, but management's conviction is structurally strong. A management team characterized as DESTRUCTIVE in capital deployment is not the team that exercises caution and terminates an acquisition voluntarily. The Eucalyptus board and sellers likely structured the deal with this understanding — they signed knowing HIMS management was committed. Conversely, the FUNDING_FRAGILITY = STRAINED signal introduces cash deterioration risk more acutely. If HIMS burns cash faster than expected in Q1-Q2 2026 (GLP-1 prescriptions ramping, potential compounding penalties, UK expansion), the $240M upfront becomes a more significant constraint by closing. However, HIMS's $175M credit facility provides a buffer. The timeline argument is the strongest YES factor: four months of buffer between mid-2026 expected closing and September 30 provides significant cushion against routine regulatory delays. Setting probability slightly above the base rate midpoint to reflect management commitment strength.

Balanced weighting of base rates against idiosyncratic risk factors. The ~87% midpoint of the 85-90% base rate is the appropriate starting anchor for a signed deal with no financing condition risk. From that anchor, I apply downward adjustments for: (1) DOJ escalation risk intersecting with deal — roughly 9% incremental risk (19% charges probability × 50% deal-termination impact); (2) FIRB/CMA regulatory delay creating September 30 timeline miss without deal failure — roughly 5% probability; (3) management or board change forcing strategic reassessment — roughly 3%; (4) Eucalyptus financial deterioration prompting renegotiation — roughly 2%. These risks are not fully independent, but treating them as additive: 87% - 9% - 5% - 3% - 2% = 68%. However, the base rate already incorporates some deal-failure risk from regulatory and strategic factors, so the 87% starting point likely already embeds 5-8% of the FIRB/CMA and strategic reassessment risks. Adjusting to avoid double-counting: 87% - 9% (DOJ increment) - 2% (net FIRB/CMA after base rate embedding) = 76%. This is the balanced assessment.

The committee finding that management's Eucalyptus signing represents either (a) counsel confidence DOJ risk is manageable or (b) systematic underpricing of regulatory risk is analytically important. If (a) is true — counsel confidence — then the deal is substantially more likely to close because the primary idiosyncratic risk factor (DOJ) is already resolved in counsel's working model. If (b) is true — systematic underpricing — then the deal is signed but the DOJ risk is higher than management believes. The DOJ-charges sibling market prediction at 19% provides an external calibration: 19% probability of charges by September 30 with the MAC carve-out likely protecting the deal means only a subset of that 19% (call it 40-50%) would actually terminate the deal before September 30. That gives ~8-10% DOJ-driven deal failure probability. The IRS of the deal — manageable cash ($929M), no financing condition, committed management, strategic rationale validated by multiple lenses — all support the base rate. The cautionary signal is the STRAINED funding position: if compounding penalties or GLP-1 market share losses hit Q1/Q2 harder than expected, a board under shareholder pressure might genuinely reconsider a $240M cash outlay. But 'might reconsider' is a low-probability outcome given the deal was signed less than a week ago. Estimate at 78%.

Focusing on the timeline risk specifically. Management guided to 'mid-2026' closing. The September 30 deadline gives roughly 4 months of buffer from June 30 to September 30. That buffer is reasonable but not abundant for a cross-border deal requiring both FIRB and potentially CMA approval plus US antitrust clearance (likely HSR filing for a transaction >$119M threshold). HSR review: standard 30-day initial period, unlikely to receive second request in telehealth. FIRB review: typically 30-90 days for formal applications. CMA: preliminary assessment 40 business days (about 55 calendar days) for phase 1. All three running in parallel from signing (February 19) would complete by approximately May-June 2026, consistent with the 'mid-2026' guidance. The risk is sequential delays: if FIRB extends its review period or requests additional information, and CMA does the same, the cascading effect could push closing to August-September 2026 — still before the deadline, but with no remaining buffer. A September 30 deadline miss probability of 15-20% seems reasonable given cross-border regulatory process variability. The deal itself is unlikely to be blocked. Setting estimate to reflect this timeline uncertainty more explicitly: 75%.

Factor-weighted assessment. Base rate: 87%. Adjustments: DOJ charges intersection (-9%), cross-border regulatory timeline miss (-7%), cash deterioration (-3%), strategic reassessment (-2%), Eucalyptus financial deterioration (-2%). Gross adjustment: -23%. Partial offset: MAC carve-out protection (+5%), management DESTRUCTIVE pattern commitment (+3%), $240M vs $929M cash feasibility (+2%). Net: 87% - 23% + 10% = 74%. Rounding to 72% given compounding nature of cross-border regulatory uncertainty not captured in pairwise adjustments. The September 30 deadline is real and cross-border deal timelines are inherently variable.

Quick factor scan: (1) Deal signed — strong YES signal; (2) No financing condition — YES; (3) Cash adequate $929M vs $240M — YES; (4) Management conviction established — YES; (5) DOJ known at signing — carve-out likely, net neutral; (6) FIRB needed — typically 30-90 days, manageable; (7) CMA possible — phase 1 standard, manageable if parallel; (8) Timeline buffer — 4 months past mid-2026 — sufficient; (9) STRAINED funding — risk if Q1/Q2 worse than expected; (10) DOJ charges materializing — 19% probability, ~50% deal kill rate, ~9-10% net risk. Positive factors outweigh negative. Setting at 74% — slightly above Run 7's 72% because the MAC carve-out argument is highly likely to be operative, making the DOJ-driven deal failure probability lower than the simple 9-10% calculation.

Conservative haiku-tier estimate weighting the tail risks more explicitly. The committee flagged management as systematically underpricing regulatory risk — this is a direct warning about the analytical framework management used when signing this deal. If management consistently underprices regulatory risk, then the deal may be facing risks they have not disclosed or fully assessed. The DOJ criminal charges market sitting at 19% is not trivial — this is a binary event with substantial deal-impact potential. Cross-border deals (Australia + potential UK CMA) with a hard September 30 deadline create non-trivial timeline risk. The FUNDING_FRAGILITY = STRAINED signal adds conditional cash risk. Setting at 70% to reflect these tail risks more conservatively while still acknowledging the strong YES base rate and favorable deal structure. This is the most cautious estimate in the ensemble.