Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Paging Dr. AmSurg to treat Team Health. 

Activist investor Jana Partners disclosed an 8 percent stake in Team Health on Thursday and said it would seek board seats in light of "missteps" made by the $3.3 billion provider of physician outsourcing services for hospitals. One of those missteps is presumably Team Health's decision to reject takeover advances from surgical-center operator AmSurg last year. AmSurg's latest proposal valued Team Health at $69.32 a share. The compares with just $38 before news of Jana's proxy fight. 

Going Downhill
Team Health's stock has slumped from where it was when the company rebuffed a takeover offer from Amsurg. Analysts have cut their price targets, too.
Source: Bloomberg

Team Health's slump is a reflection of integration issues it's had following the $1.6 billion purchase of rival IPC Healthcare last year. That deal raised eyebrows when it was announced because it was pricey and required Team Health to roughly double its reported leverage. IPC's underperformance in the time since hasn't eased those doubts. Revenue has fallen short of expectations, physicians have jumped ship and Florida suspended reimbursement for certain Medicaid claims because of an investigation by a state or federal agency.  

The IPC takeover may work out in the end, despite the current challenges. The acquisition allows Team Health to offer both post-acute and acute services to hospital partners. That's an attractive proposition in light of Medicare's bundled payments initiative, which incentivizes medical providers to better coordinate services and package all of a patient's charges into one bill. It's worth noting that AmSurg wanted IPC as part of a Team Health deal. Eventually, as the company sorts through the issues with IPC and starts to deliver on synergies, its stock price could recover.

But Team Health's missteps -- to use Jana's word -- and the presence of an activist investor provide an opening for AmSurg to re-enter the fray. This time around, it's starting from a much more attractive price point.

I wrote in October that Team Health was smart to reject AmSurg's first stock-and-cash bid because analysts were calling for the company to reach a higher price on its own over the next year. It wasn't as smart to refuse to negotiate after AmSurg countered with more cash, but that's a different story. Clearly, the big surge in Team Health's stock price that analysts were looking for didn't happen.

As of Wednesday, analysts were looking for a price of about $50 for a stand-alone Team Health -- well below the value of AmSurg's cash-and-stock proposal last year, which has now actually appreciated in value to about $71 a share. 

Bouncing Back
AmSurg's stock got hit hard by news of its Team Health pursuit in October. It's still down amid a broader market rout, but has recovered some of its losses.
Source: Bloomberg

Maybe AmSurg was the one that was smart to wait before making another house call.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Unsurprisingly, Jana's disclosure sparked a rally in the shares. The stock was up 18 percent to $45 as of 2:30 p.m. New York time on Thursday. 

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Brooke Sutherland in New York at

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Beth Williams at