Envision Healthcare Holdings acquired by KKR: fairness opinion by J.P. Morgan and Evercore and Guggenheim Securities

Deal terms

Implied value per share by method vs. $46.00 offer

Opinion of J.P. Morgan to the target board

Discounted cash flow assumptions

Selected public companies (3)

MEDNAX, Inc. (as of June 8, 2018) · MEDNAX, Inc. (as of November 15, 2017) · Surgery Partners, Inc. (as of June 8, 2018)

Selected precedent transactions (10)

Estimated fee of approximately $32.0 million, of which $3.0 million became payable upon delivery of the opinion and a substantial portion of which is contingent upon consummation of the merger. Aggregate fees received from the Company in prior two years ~$46.0 million; from KKR and affiliates ~$110.0 million.

Opinion of Evercore to the target board

Discounted cash flow assumptions

Selected public companies (7)

MEDNAX, Inc. · Surgery Partners, Inc. · AMN Healthcare Services, Inc. · DaVita Inc. · Encompass Health Corporation · Fresenius Medical Care AG & Co. KGaA · Select Medical Holdings Corporation

Selected precedent transactions (10)

Other analyses

Fee of approximately $10.2 million payable if the merger is consummated, of which $1 million was paid upon execution of the merger agreement. Separately, for general strategic advisory work, two quarterly retainer fees of $250,000 beginning October 6, 2017 and a $4.5 million fee for general strategic advisory services provided prior to June 30, 2018 (retainers creditable). Prior two years: ~$5 million fees from Envision; ~$32.5 million from KKR and affiliates.

Opinion of Guggenheim Securities to the target board

Discounted cash flow assumptions

Selected public companies (3)

MEDNAX, Inc. (as of June 8, 2018) · MEDNAX, Inc. (as of November 15, 2017) · Surgery Partners, Inc. (as of June 8, 2018)

Selected precedent transactions (10)

Other analyses

Cash transaction fee of approximately $10,210,103 payable upon consummation of the merger; Envision previously paid a cash consulting fee of $4,500,000. During the two years ended June 10, 2018, Guggenheim received ~$38 million from Envision and ~$9 million from KKR and affiliates for unrelated services.

Management projections

Year-1 growth is against LTM at announcement ($8.5B revenue, $995M EBITDA); later years are year over year.

Management prepared two sets of five-year projections for fiscal years 2018-2022: the Management Case (prepared February 2018) and the Management Sensitivity Case (downside sensitivities reflecting lower same-contract rate/volume growth and incremental clinical labor costs). Management Case: revenue of $8,525.8 million in 2018 growing to $13,085.7 million in 2022, with Adjusted EBITDA of $994.5 million in 2018 growing to $1,689.6 million in 2022 and Adjusted EPS of $3.67 to $7.15; unlevered free cash flow declined from $88.6 million in 2018 to ($680.9) million in 2022. Management Sensitivity Case: revenue of $8,525.8 million (2018) to $12,550.6 million (2022), Adjusted EBITDA of $994.5 million to $1,478.7 million, Adjusted EPS of $3.67 to $5.84, and unlevered free cash flow of $88.6 million to ($843.5) million. All three financial advisors were instructed to treat the two cases as equally likely; the Sensitivity Case was not provided to bidders including KKR.

Process notes

Other Physician Groups fairness opinions

• Network Medical Management / Apollo Medical Holdings 2016 · 9.5x EV/EBITDA
• Team Health Holdings / Blackstone 2016 · 11.5x EV/EBITDA
• Envision Healthcare Holdings / AmSurg 2016 · 11.2x EV/EBITDA
• USMD Holdings / WellMed Medical Management 2016 · 15.5x EV/EBITDA
• ExamWorks Group / Leonard Green & Partners 2016 · 11.5x EV/EBITDA
• Nutex Health / Clinigence Health 2021 · 10.0x EV/EBITDA

All Physician Groups opinions → · J.P. Morgan opinions · Evercore opinions · Guggenheim Securities opinions