1Life Healthcare / One Medical acquired by Amazon: fairness opinion by Morgan Stanley
Deal terms
Implied value per share by method vs. $18.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Morgan Stanley to the target board
Discounted cash flow assumptions
Discounted to June 30, 2022 using midyear convention. Management Case A implied $11.75-$15.00 per share; Management Case B implied $17.00-$21.50 per share. Unlevered FCF calculated with 25% effective tax rate offset by federal and state NOLs; implied aggregate values increased by net cash and present value of a future projected common equity issuance.
Selected public companies (9)
Oak Street Health, Inc. · Cano Health, Inc. · Caremax, Inc. · Agilon Health, Inc. · Teladoc Health, Inc. · LifeStance Health, Inc. · American Well Corp. (Amwell) · Accolade, Inc. · Privia Health Group, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| AV / CY2022E Revenue (unaffected, July 1, 2022) - Management Case A | 1.0x | — | 3.4x | 1.5x–2.5x | $7.75–$12.75 |
| AV / CY2022E Revenue (unaffected, July 1, 2022) - Management Case B | 1.0x | — | 3.4x | 1.5x–2.5x | $8.00–$13.00 |
| AV / CY2023E Revenue (unaffected, July 1, 2022) - Management Case A | 0.6x | — | 2.3x | 1.0x–2.0x | $8.00–$15.75 |
| AV / CY2023E Revenue (unaffected, July 1, 2022) - Management Case B | 0.6x | — | 2.3x | 1.0x–2.0x | $7.50–$14.50 |
| AV / CY2022E Revenue (July 19, 2022 multiples, reference only) | 1.4x | — | 4.0x | — | — |
| AV / CY2023E Revenue (July 19, 2022 multiples, reference only) | 0.9x | — | 2.7x | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Discounted Equity Value Analysis - Management Case A | Applied 1.5x-2.5x NTM revenue multiple to estimated NTM revenue as of year-end 2024, discounted to June 30, 2022 at a 14.8% cost of equity. | $12.50–$21.50 |
| Discounted Equity Value Analysis - Management Case B | Applied 1.5x-2.5x NTM revenue multiple to estimated NTM revenue as of year-end 2024, discounted to June 30, 2022 at a 14.8% cost of equity. | $11.25–$19.50 |
| Precedent Transactions - Premiums Paid Analysis | All-cash transactions with global public targets >$1 billion since 1996 announced on or before June 30, 2022; 27-year average premium of 40.1%. Applied a 40.0%-80.0% premium range to 1Life's July 1, 2022 closing price. | $11.59–$14.90 |
| Historical Trading Range (reference only) | 52-week period ending July 19, 2022: low closing price of $6.24 (May 11, 2022) and high of $29.79 (August 5, 2021). 30- and 60-day VWAPs ending July 1, 2022 of $8.38 and $8.25. | $6.24–$29.79 |
| Broker Price Targets (reference only) | Analyst price targets published on or before July 1, 2022 ranged from $9.00 to $17.00 undiscounted; discounted 12 months at 14.8% cost of equity to $7.75-$14.75. | $7.75–$14.75 |
Fee of approximately $49 million; $4 million paid following delivery of the opinion and the remainder contingent upon consummation of the Merger.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $1.7B | $2.4B | $2.9B | $3.4B | $3.9B | 23.0% |
| Revenue growth | 54.8% | 40.7% | 22.6% | 16.0% | 14.5% | |
| EBITDA | $-50.0M | $73.0M | $194M | $307M | $445M | — |
| EBITDA growth | — | — | 165.8% | 58.2% | 45.0% | |
| EBITDA margin | -3% | 3% | 7% | 9% | 12% | |
| Implied EV / EBITDA | — | 53.4x | 20.1x | 12.7x | 8.8x |
Year-1 growth is against LTM at announcement ($1.1B revenue, $-115.0M EBITDA); later years are year over year.
1Life management prepared two sets of standalone projections used by the board and Morgan Stanley: Management Case A (long range projections 2022-2025 with extrapolations 2026-2031, created March 2022) and Management Case B (the 2021 Iora-related projections - 1Life Case, Iora Base Case and Iora Synergies - combined, extrapolated through 2031 and updated for actual NOLs). Management Case A projects revenue of $1,089 million in 2022E growing to $5,730 million in 2031E, with Adjusted EBITDA of $(115) million in 2022E rising to $1,146 million in 2031E and unlevered FCF of $(325) million to $710 million. Management Case B projects revenue of $1,114 million in 2022E growing to $9,963 million in 2031E, with Adjusted EBITDA of $(103) million to $1,822 million and unlevered FCF of $(262) million to $977 million; both cases assume a standalone capital raise of $300 million at the end of 2022 and a 25% effective tax rate offset by $869 million federal and $568 million state NOLs.
Process notes
Other Physician Groups fairness opinions
- Signify Health / CVS Health 2022 · 33.0x EV/EBITDA
- Tivity Health / Stone Point Capital 2022 · 12.1x EV/EBITDA
- Oak Street Health / CVS Health 2023
- Nutex Health / Clinigence Health 2021 · 10.0x EV/EBITDA
- Envision Healthcare Holdings / KKR 2018 · 10.0x EV/EBITDA
- Network Medical Management / Apollo Medical Holdings 2016 · 9.5x EV/EBITDA