AmSurg acquired by Envision Healthcare Holdings: fairness opinion by Evercore
Deal terms
Merger of equals: AmSurg merged with and into Newco (Merger 1) and Envision merged with and into Newco (Merger 2). Each share of Envision common stock converted into 0.334 shares of Newco common stock; AmSurg shareholders received Newco shares on a one-for-one basis.
Implied value per share by method
Ranges as disclosed in the banker’s summary of analyses.
Opinion of Evercore to the acquirer board
Discounted cash flow assumptions
AmSurg terminal multiple method implied $93.15-$130.00 per share; AmSurg perpetuity growth method (2.5%-3.0%) implied $104.90-$172.07 per share. Envision DCF: discount rates 6.5%-7.5%, terminal EV/EBITDA 9.5x-12.0x implied $39.98-$55.48; perpetuity growth 2.25%-2.75% implied $44.26-$68.65. Implied exchange ratio ranges 0.307-0.596 (terminal multiple) and 0.257-0.654 (perpetuity growth) vs. Exchange Ratio of 0.334.
Selected public companies (6)
MEDNAX, Inc. · TeamHealth, Inc. · Air Methods Corp. · The Providence Service Corporation · Surgical Care Affiliates, Inc. · Surgery Partners, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Envision peers: TEV / 2015A EBITDA | 8.1x | — | 12.4x | — | — |
| Envision peers: TEV / 2016E EBITDA | 6.6x | — | 11.2x | 9.0x–11.5x | $18.53–$27.75 |
| Envision peers: TEV / 2017E EBITDA | 6.1x | — | 10.2x | 8.0x–10.5x | $19.96–$30.75 |
| Envision: TEV / 2016E EBITDA (Consensus Projections) | — | — | — | 9.0x–11.5x | $18.93–$28.25 |
| Envision: TEV / 2017E EBITDA (Consensus Projections) | — | — | — | 8.0x–10.5x | $18.88–$29.35 |
| AmSurg peers: TEV / 2015A EBITDA | 11.8x | — | 14.7x | — | — |
| AmSurg peers: TEV / 2016E EBITDA (Management Case) | 11.0x | — | 13.0x | 10.5x–12.5x | $70.30–$90.74 |
| AmSurg peers: TEV / 2017E EBITDA (Management Case) | 9.1x | — | 11.7x | 9.5x–11.5x | $73.72–$97.03 |
| AmSurg: TEV / 2016E EBITDA (Consensus Projections) | — | — | — | 10.5x–12.5x | $70.80–$91.33 |
| AmSurg: TEV / 2017E EBITDA (Consensus Projections) | — | — | — | 9.5x–11.5x | $72.25–$95.25 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Sum-of-the-Parts Analysis - AmSurg | Segments valued separately: Outsourced Physician Services (10.5x-12.5x 2016E; 9.5x-11.5x 2017E; $3,759-$4,475m / $3,993-$4,834m) and Ambulatory Surgery Centers (10.5x-12.5x 2016E; 9.5x-11.5x 2017E; $2,464-$2,933m / $2,428-$2,939m). Summary value $6,222-$7,407m (2016) and $6,421-$7,772m (2017); less net debt of $2,143m gave equity of $4,079-$5,265m and $4,278-$5,629m, i.e. $70.30-$90.74 per share (2016) and $73.72-$97.03 (2017) vs. unaffected price of $76.36 on June 7, 2016. Segment peers: MEDNAX, TeamHealth, Surgical Care Affiliates, Surgery Partners. Implied exchange ratios 0.204-0.368 (2016) and 0.205-0.385 (2017). | $70.30–$97.03 |
| Sum-of-the-Parts Analysis - Envision | Outsourced Physician Services (10.5x-12.5x 2016E; 9.5x-11.5x 2017E; $4,491-$5,347m / $4,847-$5,868m) and Medical Transportation (7.0x-9.0x 2016E; 6.0x-8.0x 2017E; $2,079-$2,673m / $1,996-$2,661m); summary value $6,570-$8,020m (2016) and $6,844-$8,529m (2017); less net debt of $2,954m yielded $18.52-$25.85 per share (2016) and $19.91-$28.41 (2017) vs. unaffected price of $25.54 on June 7, 2016. Peers: MEDNAX, TeamHealth, Air Methods, The Providence Service Corporation. | $18.52–$28.41 |
| Last Twelve Month Trading Range | For the twelve months ended June 13, 2016, closing prices ranged $18.31-$45.95 for Envision and $54.11-$87.42 for AmSurg, implying an exchange ratio range of 0.209 to 0.849 vs. the 0.334 Exchange Ratio. Informational only. | $54.11–$87.42 |
| Research Analyst Price Targets | As of June 14, 2016, analyst price targets ranged $27.00-$37.00 for Envision and $88.00-$100.00 for AmSurg, implying an exchange ratio range of 0.270 to 0.420 vs. the 0.334 Exchange Ratio. Informational only. | $88.00–$100.00 |
| Historical Share Price Ratio | Ratio of Envision to AmSurg closing prices for the one year ended June 7, 2016: one-year average 0.395, six-month 0.307, three-month 0.294, one-month 0.319, and 0.334 as of the last unaffected date (June 7, 2016), vs. the Exchange Ratio of 0.334. | — |
| Contribution Analysis | Relative contributions to combined Adjusted EBITDA, Adj. EBIT and Adj. net income for 2016E-2018E. 2016E Adj. EBITDA: Envision $730m / AmSurg $593m / combined $1,323m (53.5%/46.5% levered; 55.2%/44.8% unlevered); 2018E Adj. EBITDA: Envision $1,007m / AmSurg $757m / combined $1,764m (55.4%/44.6% levered). | — |
| Illustrative Theoretical Pro Forma Analysis | Reviewed for informational purposes only, reflecting the Projected Synergies; not a valuation methodology. | — |
Opinion fee of $2.5 million, $1.25 million paid promptly following delivery of the opinion and $1.25 million payable upon closing; additional $2.5 million general financial advisory fee payable upon closing per August 24, 2016 engagement letter. Evercore acted as one of Envision's financial advisors and delivered its opinion to the Envision Board on the fairness of the Exchange Ratio to Envision stockholders.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $3.5B | $3.9B | $4.3B | $4.8B | 11.0% |
| Revenue growth | 13.1% | 11.7% | 10.6% | 10.8% | |
| EBITDA | $676M | $757M | $847M | $951M | 12.0% |
| EBITDA growth | 14.0% | 12.0% | 11.9% | 12.3% | |
| EBITDA margin | 19% | 19% | 20% | 20% | |
| Implied EV / EBITDA | 10.5x | 9.4x | 8.4x | 7.5x |
Year-1 growth is against LTM at announcement ($3.1B revenue, $593M EBITDA); later years are year over year.
Evercore used the Envision Projections (prepared by Envision management) and the AmSurg Projections (prepared by AmSurg management and furnished by Envision management), covering June 30, 2016 through December 31, 2020, plus IBES Consensus Projections for both companies. Contribution analysis figures show Envision Adjusted EBITDA of $730m (2016E) rising to $1,007m (2018E) and AmSurg Adjusted EBITDA of $593m (2016E) rising to $757m (2018E); combined Adjusted EBITDA of $1,323m (2016E) to $1,764m (2018E). Projected Synergies were also reviewed, at the direction of Envision, based on management assessments.
Process notes
Other Specialty Outpatient Facilities fairness opinions
- Alliance Healthcare Services / Tahoe Investment Group Co. 2017 · 5.7x EV/EBITDA
- Surgical Care Affiliates / Optum 2017 · 16.4x EV/EBITDA
- NovaMed / Surgery Partners 2011 · 7.8x EV/EBITDA
- HealthTronics / Endo Health Solutions 2010 · 8.7x EV/EBITDA
- Dialysis Corporation of America / U.S. Renal Care 2010 · 14.1x EV/EBITDA
- FONAR / Damadian family Acquisition Group 2025 · 4.3x EV/EBITDA
All Specialty Outpatient Facilities opinions → · Evercore opinions