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Envision Healthcare Holdings and AMSURG Corp to merge

Combined organization will be worth about $10 billion, with an enterprise value of approximately $15 billion, companies say.

Jeff Lagasse, Associate Editor

Envision Healthcare Holdings and AMSURG Corp. have announced plans to merge, with the combined organization worth about $10 billion, and with an enterprise value of approximately $15 billion based on Tuesday's closing stock prices for the two groups.

Envision shareholders will own approximately 53 percent of the combined organization, and AMSURG shareholders will own the remaining 47 percent on a fully diluted basis, including preferred shares. The transaction has been unanimously approved by the boards of directors of both companies.

The merger is expected to be tax-free to the shareholders of both organizations. When it's finalized, the combined company will be named Envision Healthcare Corporation to be co-headquartered in Nashville, Tennessee and Greenwood Village, Colorado. The Company's common stock is expected to trade on the New York Stock Exchange under the ticker symbol EVHC.

The two companies had combined revenue of more than $8.5 billion -- and adjusted earnings before interest, taxes, depreciation and amortization of more than $1.1 billion -- for the 12-month period ending March 31.

[Also: AmSurg buys Jandee Anesthesiology Partners, expands anesthesiology services]

In a joint statement, the companies offered strategic and financial rationale for the partnership. They claim they'll have complementary strengths as a physician-led organization, spanning from pre-hospital, acute and outpatient care to post-acute care, and that they'll be able to create efficiencies through more effective care coordination.

The combined company, they say, will have a strong balance sheet, as well as a diversified business mix and significant cash-flow generation, which is expected to be deployed for future acquisitions, driving further growth.

Marrying the two companies is also expected to result in $100 million of synergies, anticipated to be fully realized within three years of closing. Synergies are expected to be derived through cost savings as well as meaningful revenue synergies from an enhanced portfolio and cross-selling opportunities.

In the joint statement, the organizations said the transaction is expected to be accretive to the two companies' combined adjusted earnings per share in 2017, and double-digit accretive in 2018.

[Also: UPDATED: AmSurg withdraws higher bid for TeamHealth]

Christopher Holden will be president and CEO of the combined company, the same position he currently holds with AMSURG. In a statement he said that, within a fragmented marketplace, "we will have the critical first mover advantage to capitalize on the greenfield and cross-selling opportunities across our various offerings, and generate significant value for our shareholders."

AmSurg has partnerships with, or employs, more than 5,000 physicians and other healthcare professionals in 38 states and the District of Columbia. In early November 2015, the company made headlines when they pulled out of a high-profile, $7.6 billion deal with TeamHealth, a physician services company, that would have given shareholders 0.768 shares of AmSurg and $15.49 in cash for every share of TeamHealth. That was a raise from the original offer, which included more than $11 in cash per share of TeamHealth.

AmSurg pulled out of the deal, blaming TeamHealth board members for failing to engage with them.

Twitter: @JELagasse

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