What’s the Rationale for the Amsurg-Envision Merger?



Rationale for the merger

As we saw in the first part of this series, Amsurg (AMSG) and Envision (EVHC) are merging in a stock-for-stock transaction. Envision shareholders will receive 0.334 shares of Amsurg stock for each share of Envision they hold. This deal is about creating scale and wringing out synergies. As the entire healthcare space consolidates, companies are bulking up in order to create negotiating power.

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Management comments

William Sanger, Envision’s current CEO, said that “At Envision, we have been actively advancing our integrated delivery and market-centric strategies while AMSURG has been diversifying and building its national presence. Our two organizations complement each other in a way few others could, and this merger will accelerate our collective ability to positively impact healthcare delivery across the country. We are excited for the future and look forward to the opportunity to combine the resources of Envision and AMSURG.”

Christopher Holden, Amsurg’s current CEO, added that “This merger will create a national platform with a highly differentiated suite of solutions. It will significantly increase our ability to empower physicians and expand our client relationships. Within a highly 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.”

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Synergies and earnings impact

The transaction is expected to be accretive to earnings in 2007. It will be accretive by more than 10% in 2018. The companies anticipate $100 million in annual synergies within three years of closing. Some of these will be cost synergies and some will be revenue synergies as a result of cross-selling opportunities.

Other merger arbitrage resources

Other important merger spreads include the Cigna (CI)-Anthem (ANTM) deal. It’s slated to close in 2H15. For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the healthcare sector should look at the S&P SPDR Healthcare ETF (XLV).


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