It’s been a bumpy road for Envision Healthcare (NYSE: EVHC). The company went public in 2013, with revenues of $3.7 million. In 2018, it is going private with KKR & Co. (NYSE: KKR), with revenues of $8.0 billion.
In 2014, Envision operated American Medical Response, Inc., an air ambulance company; EmCare Holdings, provider of physician practice management services for emergency departments, inpatient physician services or hospitals; and practice management services company Evolution Health.
Since then, it acquired seven physician practices, beginning with Phoenix Physicians, LLC in Fort Lauderdale, Florida ($170 million, June 2014) to Emergency Physicians Medical Group ($12o million, March 2016).
The big change came in June 2016, when Envision announced its merger with AmSurg Corp. (then NASDAQ: AMSG) in Nashville, Tennessee. At the time, AmSurg provided ambulatory and physician services to 450 healthcare facilities in 29 states, as well as operating of 257 ambulatory surgery centers in 34 states.
The $6.7 billion transaction was an all-stock transaction at a fixed exchange ratio of 0.344 AmSurg shares per Envision share, plus $2.36 billion of debt. Envision Healthcare shareholders owned 53% and AMSG shareholders owned 47%.
The two companies had combined revenue of $8.5 billion and adjusted EBITDA of $1.1 billion for the 12 months ended March 31, 2016. The CEO of AmSurg, Chris Holden, took over as CEO of the combined company.
Even as the two companies integrated, acquisitions continued. In December 2016, two more were announced, for Alabama Neonatal Medicine in Montgomery, Alabama and Desert Mountain Consultants in Anesthesia, in Phoenix, Arizona.
By 2017, the Affordable Care Act was under direct attack by Republicans, who controlled the White House and both houses of Congress. Inpatient volumes, which had been on the decline for years, slowed even further. It was clear Envision wasn’t benefitting. Its stock, which hit a five-year high of $134.13 on July 27, 2015, slid to $50.21 per share on August 14, 2017, the week after the company announced the sale of its air medical transportation subsidiary, American Medical Response, to KKR for $2.4 billion.
In November 2017, as Envision reported low third-quarter earnings, the company said it would explore strategic alternatives, including a sale, to boost shareholder value. In 2018, bidders lined up, including The Carlyle Group (NASDAQ: CG), TPG Capital and KKR.
Reuters reported in May that KKR had teamed up with for-profit hospital company HCA Healthcare (NYSE: HCA), but when the winner was announced on June 11, KKR was alone with its offer of $46.00 per share, and agreement to assume EVHC’s $4.62 billion in debt. The approximately $9.9 billion price represents a 32% premium to Envision’s volume-weighted average share price from Nov. 1, 2017, when the company reported its third quarter earnings.
At the close of the transaction, Envison will become a private company and its stock will no longer be traded on the NYSE. The price represents a multiple of 10.9x ttm Adjusted EBITDA and 10.1x 2018 anticipated Adjusted EBITDA. The deal is expected to close in the fourth quarter of 2018.
There are still several divisions within Envision that KKR may jettison, including the ambulatory surgery centers, which have been a drag on earnings, and some home health divisions. HCA may yet be a party to this transaction. We wouldn’t be surprised.