KKR To Take Envision Healthcare Private In $10B Deal
The company had reportedly been conducting an auction for its sale after announcing a strategic review last fall.
NASHVILLE, TN–In the latest sign that private equity is hungry for health care deals, KKR will acquire Envision Healthcare in an all-cash deal valued at $9.9 billion that includes debt.
Envision Healthcare is a provider of physician services, post-acute care, and ambulatory surgery services with a network of 25,000 clinical professionals at thousands of hospitals, surgery centers across the country. It also owns 261 surgery centers and one surgical hospital, across 35 states and the District of Columbia. Last year it announced it was conducting a strategic review of its alternative options and, according to news reports, it had been conducting an auction for its sale in recent weeks.
Under the terms of the agreement, which has been unanimously approved by Envision’s Board of Directors, KKR will acquire Envision’s common stock for $46 per share in cash, for a 32% premium to Envision’s share price on November 1, 2017, the day after the company announced it was reviewing strategic alternatives. The transaction price represents a multiple of 10.9x trailing 12 months Adjusted EBITDA and 10.1x 2018 anticipated Adjusted EBITDA.
KKR will be making the investment primarily from its KKR Americas Fund XII.
Last year the company lost $228 million, even though it collected $7.8 billion in revenue, according to the New York Times. Envision Healthcare’s strategic review has included capital structure alternatives, potential acquisitions, portfolio optimization, a potential sale of the whole company, and continued operation as a standalone business. The process involved outreach to 25 potential buyers, including financial sponsors and strategic entities, and invited proposals for all or parts of the business.
The deal is expected to be closed in the fourth quarter of this year, subject to customary closing conditions, regulatory and shareholder approval. Envision intends to present the proposed transaction at the company’s 2018 annual meeting, which will be held no later than October 1, 2018. When the deal closes, Envision will become a private company, and its common stock will stop trading on the New York Stock Exchange.
Healthcare has been an attractive target for private equity companies, drawn by the sector’s high returns and strong public valuations. This is a long-standing trend in fact. A few years ago McKinsey analyzed 140 private investments in US healthcare companies from 1995 to 2014 and found that returns were 1.5 times higher than the broader public market, and, in five of eight subsectors, outstripped the US private-equity industry.
As recent events show, this trend shows little sign of abating. Last year, for example, Kindred Healthcare was taken private by a group that included TPG Capital, Welsh Carson and Humana in a $4.1-billion deal. Smaller deals are proliferating as well, such as EyeSouth Partners’ strategic partnership with South Georgia / North Florida Eye Partners and Cataract and Laser Surgery Center earlier this month. EyeSouth is an eye care-focused physician services organization formed by Shore Capital Partners, a lower middle market healthcare private equity firm.