Image by Kevin Schneider from PixabaySurgery Partners has confirmed it received a non-binding acquisition proposal from Bain Capital Private Equity.
The proposal was delivered to ambulatory surgery center (ASC) giant Surgery Partners on Jan. 27. In it, Bain Capital proposed to buy all of the outstanding shares of Surgery Partners it doesn’t already own for a cash consideration of $25.75 per share.
Bain Capital and its affiliates own about 39% of Surgery Partners’ common stock.
Moving forward, a special committee of independent directors of the Surgery Partners board is expected to consider the Bain Capital proposal. It will do so with the assistance of independent financial and legal advisors, according to Surgery Partners.
“The company cautions its shareholders and others considering trading in its securities that no decisions have been made with respect to the company’s response to the proposal,” Surgery Partners wrote in a Jan. 28 announcement. “The Bain Capital proposal is non-binding, and there can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.”
The $25.75 per share proposal from Bain Capital represented a roughly 21% premium on Surgery Partners’ stock value at Monday’s close of trading.
Multiple industry insiders told Ambulatory Surgery Center News that this offer felt lower than one would expect for Surgery Partners. The ASC market is booming and projected to continue growing for the foreseeable future, they pointed out.
“Very exciting news, as Surgery Partners is a great company with a phenomenal executive team and growth trajectory, but it has been challenged in the public markets as there are no other public ‘ASC company benchmarks,’ as both SCA Health and USPI are part of much larger diversified health care companies (United Healthcare and Tenet),” Scott Fraser, founder and managing partner of Fraser Healthcare, told ASC News in an email.
Analysts generally agreed with the notion that Bain’s offer was on the lower end.
“Bain’s offer values SGRY at 11x ’25 EBITDA-NCI, which is at the low end of what most investors had expected the company could get sold at (based on historical M&A multiples and the stock’s recent trading range/growth fundamentals),” Jefferies analysts wrote in a Tuesday note.
Jefferies analysts pointed out that the deal between UnitedHealth Group (NYSE: UNH) and Surgical Care Affiliates in 2017 came at a 15 times multiple.
“Our thought is that the offer is at the lower end of what we would have expected SGRY would have sold for in a competitive process, though we acknowledge that the list of potential strategic acquirers that would have actual interest at the moment is rather short,” the note continued.
