A Large Surgery Company Is Being Bought and Taken Off the Stock Market
Surgery Partners Inc. is set to be bought by an affiliate of Bon Secours Mercy Health, the U.S.-based organization abbreviated BSMH. The deal is valued at $5.7 billion. The buyer has agreed to pay $23.50 per share, according to the HealthSpan Partners announcement.
The two numbers measure different things. The $5.7 billion is the enterprise value. That is the value of the company's shares plus its debt, minus the cash it holds. Think of a house with a mortgage. The full price of the house includes the loan, but the owner's own share is what is left after the bank is paid. The $23.50 is what ordinary shareholders receive for each share. If you compare the deal to the stock's trading price, keep that difference in mind.
The buyer is named HealthSpan Partners. According to Yahoo Finance, the deal will take Surgery Partners private. That means its shares will be removed from public stock markets.
Bain Capital holds a stake of nearly 40 percent in Surgery Partners. Affiliates of Bain will roll over their shares. In a rollover, they trade their shares for ownership stakes in HealthSpan instead of taking cash when the deal closes. So Bain does not get paid in cash right away. It keeps a financial stake in the business under its new owners.
The price is higher than earlier reports. Bloomberg, citing the Financial Times, reported on October 25 that Bon Secours was nearing a purchase of nearly $6 billion. That report valued the group at about $20 a share. The $23.50 price is roughly 17.5 percent above that $20 figure. The $5.7 billion enterprise value is below the near-$6 billion number in that report.
The company is large. Surgery Partners' website describes more than 300 locations in 30 states, more than 16,000 employees, and 5,000 affiliated physicians. It says it serves more than 670,000 patients a year. Its services include physician practices covering many medical specialties, along with anesthesia services, the doctors who put patients to sleep for surgery. The release says the goal is to build a leading outpatient surgical care platform. Outpatient surgery is surgery where patients usually go home the same day.
In my view, how the deal is built matters as much as its price. When a company goes private and a large existing owner rolls over, the risk and the reward shift to the new owners. Bain's return will depend on how the business performs under HealthSpan, not only on the $23.50 price. The announcement does not say how the deal will be financed, meaning how much comes from equity and how much from debt. That is the detail to watch.
For patients and employees, the near-term picture is continuity. The network keeps running, but its owners are about to change from public shareholders to a private group. The announcement does not describe any changes to medical care.
