NeueHealth acquired by New Enterprise Associates: fairness opinion by Lincoln International
Deal terms
Implied value per share by method vs. $7.33 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Lincoln International to the special committee
Discounted cash flow assumptions
Unlevered FCF derived from adjusted EBITDA less taxes at 23.5%, capex, changes in other operating cash flows and net working capital. Indicated enterprise value $1,060M-$1,195M; plus present value of NOL tax benefits of $170M-$185M gives EV of $1,230M-$1,380M; aggregate equity value $849M-$986M; after preferred liquidation preference intrinsic common value was zero, so an option pricing model (55% levered volatility, 0.24-year term to March 15, 2025 CMS payment due date) produced common equity value of $29M-$75M, or $1.98-$5.17 per share on 14,434,241 fully diluted shares.
Selected public companies (14)
Alignment Healthcare, Inc. · Centene Corporation · Clover Health Investments, Corp. · Elevance Health, Inc. · Humana Inc. · Molina Healthcare, Inc. · Oscar Health, Inc. · The Cigna Group · UnitedHealth Group Incorporated · agilon health, inc. · Astrana Health, Inc. · InnovAge Holding Corp. · P3 Health Partners Inc. · Privia Health Group, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2024 EBITDA (selected public companies, consolidated) | 7.0x | 9.5x | 71.5x | — | — |
| EV / 2025 EBITDA | 5.8x | 7.1x | 52.1x | 13.0x–15.0x | — |
| EV / 2026 EBITDA | 3.5x | 6.9x | 36.1x | 5.5x–6.5x | — |
| EV / 2024 Revenue | 0.1x | 0.4x | 1.4x | — | — |
| Selected public companies analysis - resulting per share value (after NOLs, equity value bridge and option pricing model allocation) | — | — | — | — | $0.98–$3.90 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Option Pricing Model (OPM) allocation of aggregate equity value | Because the Preferred Stock liquidation preference exceeded aggregate equity value, Lincoln allocated value among Series A Preferred, Series B Preferred and Common Stock using an option pricing model (55% levered equity volatility, ~0.24-year term tied to the March 15, 2025 CMS payment due date). Resulted in aggregate common stock value of $29M-$75M (DCF) and $14M-$56M (selected public companies), i.e. $1.98-$5.17 and $0.98-$3.90 per share, versus $7.33 merger consideration. | $0.98–$5.17 |
| Premiums paid analysis (preliminary, presented to Special Committee August 2024) | Lincoln prepared and updated (through August 15, 2024) a table of premiums paid in transactions it deemed relevant to the proposed NEA transaction, used to evaluate NEA's proposals and the premiums implied by potential counterproposals. No implied per-share range disclosed. | — |
Aggregate fee of $1.4 million; a portion payable upon retention, a portion upon the Special Committee's request to prepare the opinion, a portion upon Lincoln informing the Special Committee it was prepared to render its opinion (the Opinion Fee), and the balance payable upon closing of the Merger. No portion contingent on the conclusions in the opinion; no portion of the Opinion Fee contingent on consummation. $700,000 paid to date.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | CAGR |
|---|---|---|---|---|
| Revenue | $1.7B | $2.7B | $3.7B | 45.9% |
| Revenue growth | 82.8% | 57.7% | 34.9% | |
| EBITDA | $87.5M | $193M | $332M | 94.8% |
| EBITDA growth | 226.5% | 120.5% | 72.2% | |
| EBITDA margin | 5% | 7% | 9% | |
| Implied EV / EBITDA | 16.7x | 7.6x | 4.4x |
Year-1 growth is against LTM at announcement ($940M revenue, $26.8M EBITDA); later years are year over year.
Lincoln relied on the Management Projections, which forecast the Company for fiscal years 2024 through 2027. Unlevered free cash flow was derived from adjusted EBITDA less taxes at a 23.5% rate, capital expenditures, changes in other operating cash flows and changes in net working capital; management also provided depreciation and amortization tax benefits and NOL carryforward benefits (PV of $170M-$185M). Specific revenue and EBITDA dollar figures for the projection years are not disclosed in the sliced sections, though the selected companies analysis applied multiples to projected 2025 and 2026 Adjusted EBITDA.
Process notes
Other Managed Care fairness opinions
- Performant Healthcare / Machinify 2025 · 43.2x EV/EBITDA
- Magellan Health / Centene 2021 · 15.6x EV/EBITDA
- WellCare Health Plans / Centene 2019 · 14.5x EV/EBITDA
- Dental Care Plus Group / DentaQuest 2019 · 10.4x EV/EBITDA
- Express Scripts Holding / Cigna 2018 · 11.6x EV/EBITDA
- Aetna / CVS Health 2017 · 12.1x EV/EBITDA
All Managed Care opinions → · Lincoln International opinions