Envision to Merge With AmSurg to Create Health Services Giant

Envision Healthcare Holdings Inc. and AmSurg Corp. agreed to merge in an all-stock deal that will create a super-sized U.S. provider of physicians and health-care services with a combined enterprise value of $15 billion.

Envision’s investors will own about 53 percent of the combined firm, which will be called Envision Healthcare Corp. The exchange ratio is 0.334 AmSurg shares for each Envision share, the companies said in a statement. That implies a valuation of $25.89 for Envision, or about $4.8 billion, based on AmSurg’s closing price on Wednesday.

The tax-free transaction will create one of the largest U.S. providers of physicians in specialties including emergency, anesthesia, radiology and children’s services. AmSurg, which also helps operate ambulatory surgery centers, had tried to combine with another contract-physician company last year, but dropped its bid for Team Health Holdings Inc. after the target company declined to enter merger talks.

“Amsurg has been very consistent and vocal about their view that they want to get bigger,” said Brian Tanquilut, an analyst at Jefferies. “They feel that there’s an advantage to having a pretty wide range of services that they offer.”

Gaining Leverage

The merger will also help gain leverage in negotiations with health insurers that are undergoing consolidation of their own, with two pending mega-deals by Anthem Inc. and Aetna Inc. that would reduce the ranks of the largest U.S. health insurers from five to three.

AmSurg’s chief executive officer, Christopher Holden, will take that title at the new company, while Envision Chairman and Chief Executive Officer William Sanger will become executive chairman of the combined firm.

The deal will boost the combined firm’s per-share adjusted earnings in 2017, according to the companies. They expect $100 million of synergies within three years of completing the deal, from cost cutting and increased revenue. They said they expect the deal to close this year.

Envision’s implied value of $25.89 is lower than Wednesday’s closing price of $27.51, and the shares fell 8.9 percent to $25.06 in after-hours trading. The stock had risen in the past week after the Wall Street Journal reported merger talks between the companies.

Barclays Plc was lead financial adviser to Envision, and Evercore Partners Inc. also provided financial advice. AmSurg’s financial advisers were Guggenheim Securities and JPMorgan Chase & Co. Debevoise & Plimpton LLP was Envision’s legal counsel, while Bass, Berry & Sims Plc advised AmSurg.

(An earlier version of the story corrected some of the terms of the deal.)

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