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What’s behind LifePoint Health Stock’s Rise Today?

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LifePoint Health’s stock performance

Today, LifePoint Health (LPNT) announced that it would be merging with RCCH HealthCare Partners, which is owned by funds that are managed by the affiliates of private equity player Apollo Global Management, to form a privately held combined company called LifePoint Health. The deal is worth $5.6 billion, payable to shareholders as $65 per LifePoint Health share. This consideration also includes $2.9 billion in net debt and minority interest in LifePoint Health. The transaction is expected to result in a healthcare company with more than $8.0 billion in 2017 pro forma revenue, 60,000 employees, 12,000 licensed beds, and 7,000 physicians.

Since the purchase price is almost 36% higher than the company’s value on July 20, the last trading day prior to the announcement, LifePoint Health stock rose ~34.1% to $64.25 earlier today. To know more about LifePoint Health, read An Overview of LifePoint Hospitals.

The above diagram gives an overview of LifePoint Health at the end of Q1 2018. In fiscal 2018, the company expects revenue of $6.35 billion–$6.43 billion, EBITDA of $725 million–$765 million, and a margin of 11.4%–11.9%.

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Business operations

At the end of Q1 2018, LifePoint Health’s network comprised 71 hospitals, ~60 post-acute service providers, and ~25 outpatient centers. The company had ~42,000 employees and affiliated partners, 2,500 providers, and more than 6,100 associated physicians.

Of the company’s 71 hospitals, 55 (78%) were the sole community hospitals in their PSAs (primary service areas), 11 (~15%) held the largest market share in their PSAs, and five (7%) placed second or third in their PSAs. The company’s competitive hospital positioning has helped it in pricing negotiations with managed care organizations and securing talent.

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