Provides 36% Current Premium to TeamHealth
Shareholders
Combination Creates Leading National
Provider of Outsourced Physician Services with Expanded Growth
Opportunities and Enhanced Free Cash Flow
Expected To be Immediately Accretive to
Earnings Based on Synergies of $200-$290 Million
Enables Optimized Financing for
AmSurg/TeamHealth and TeamHealth/IPC Transactions
AmSurg Corp. (Nasdaq: AMSG) today announced a proposal to
combine with Team Health Holdings, Inc. (NYSE: TMH) in a
stock-and-cash merger at a fixed exchange ratio of 0.768x AmSurg
shares per TeamHealth share, which will result in pro forma 50/50
ownership of the combined company. TeamHealth shareholders also
will receive cash consideration of $11.49 per share. The proposal
has a total current value of $71.47 per TeamHealth share, or a
total enterprise value of $7.8 billion, based on AmSurg’s closing
stock price yesterday. This represents a current premium of 36% to
TeamHealth shareholders.
Christopher A. Holden, President and Chief Executive Officer of
AmSurg, said, “Our proposed combination will be transformational
for both AmSurg and TeamHealth shareholders as well as for the
physician services sector as a whole. TeamHealth shareholders will
receive immediate cash value equivalent to 22% of its market
capitalization, and share equally in our combined company’s upside.
The combined company will have significantly enhanced free cash
flow, expanded opportunities to accelerate growth, an attractive
risk profile, $200 million to $290 million in annual synergies, and
the ability to rapidly de-leverage. Comprising a network of more
than 1,200 healthcare facilities and approximately 20,000
clinicians, AmSurg and TeamHealth together will become the most
comprehensive provider of outsourced clinical services to health
systems, and will create a platform for unprecedented growth in the
sector. Together, we will hold leading positions in several
industry verticals: ambulatory surgery, anesthesia, emergency
services, hospitalists, radiology and neonatology.”
“This combination will be a true partnership that will integrate
our industry-leading physician sub-specialties and expand and
deepen the combined company’s health system relationships,
instantly creating an extensive national geographic footprint,”
said Mr. Holden. “Our combined scale and comprehensive service
portfolio, coupled with a shared commitment to quality and
coordination of care and maintaining close physician relationships,
will have tremendous benefits for our health system clients,
payers, physicians, and the employees of both companies.”
Mr. Holden added, “We believe AmSurg’s successful acquisition
and integration of Sheridan can serve as a roadmap for the
partnership with TeamHealth. The financial performance of AmSurg
since closing that transaction has exceeded our initial public
guidance on every metric. Engaging now also gives us the
opportunity to further enhance shareholder value by optimizing the
financing of the AmSurg/TeamHealth and TeamHealth/IPC transactions
and could decrease aggregate financing expense by $100 million to
$150 million. We believe strongly in this combination and hope
TeamHealth’s Board will engage with us promptly to reach an agreed
transaction.”
Under the terms of the proposed merger, the combined company
would assume the TeamHealth name, and TeamHealth would continue to
operate out of its headquarters. The Board of Directors will
include representatives from AmSurg and TeamHealth. Mr. Holden will
be Chief Executive Officer and will lead a management team
comprised of senior leaders from both organizations. The AmSurg and
Sheridan operations will retain their brands.
Guggenheim Securities and J.P. Morgan Securities LLC are acting
as financial advisors and Bass, Berry & Sims PLC is acting as
legal counsel to AmSurg in connection with the proposed
transaction.
Representatives of AmSurg met with representatives of TeamHealth
to discuss the proposed merger in September 2015. Below is the text
of a letter that was sent on October 12, 2015 to Lynn Massengale,
Chairman of TeamHealth, regarding the proposed merger:
October 12, 2015
Board of DirectorsTeam Health Holdings,
Inc.265 Brookview Centre Way, Ste. 400Knoxville, TN 37919c/o Lynn
Massingale, Chairman
Dear Members of the Board:
We appreciated the opportunity to meet with
Dr. Lynn Massingale on September 30, 2015, to discuss our bold
vision for the potential combination of our two companies. Dr.
Massingale characterized our presentation as both “thoughtful and
thought-filled.” We left the meeting optimistic that our proposal
would be given robust consideration with adequate resources and
expertise. Instead, we are disappointed to learn that you chose not
to engage with us based on what appears to be a very cursory
analysis of our specific proposal and key deal terms. Our goal here
is to ask you to reconsider your position with full appreciation of
solutions available to address your immediate concerns.
We are mindful that TeamHealth is nearing the
completion of its acquisition of IPC. We recognize that your
initial reaction to our proposal reflects caution and conservatism
flowing from that pending transaction. While we appreciate that
timing is a reasonable issue here, the question is not “why now?”
but rather “why wait?”. We want to reiterate that we are fully
supportive of that transaction, and the combination of AmSurg and
TeamHealth would not prevent or delay its closing but in fact,
further ensure its success. We have every confidence in
TeamHealth’s ability to integrate IPC. More importantly, as I
relayed to Dr. Massingale and Mike Snow, we believe we have
solutions and specific integration experience and success that more
than adequately address your short term fears and concerns. We also
believe you have access to the resources and experts necessary to
simultaneously vet this proposal. The magnitude of this opportunity
far outweighs any manageable integration risk. In addition, if you
were not to engage with us now in a collaborative way, it could
possibly sub-optimize the capital structure of a combination with
AmSurg in the future - or worse - result in the loss of this
opportunity completely. This is a bold vision that requires bold
leadership from both Boards. Now is the time.
We believe our vision is catalytic and
transformational, not only for our respective companies, but also
to the physician services sector. Our specific proposal reflects
that as well. We’re in it together 50-50 and neither one of us is
truly “selling.” We view it as a true partnership with a shared
vision and the opportunity for our shareholders to participate
equally in the value created. We are confident that TeamHealth is
the ideal partner with industry leading physician sub-specialties
and deep health system relationships that complement ours. We share
the same strong and differentiating commitment to quality of care
and cultural commitment to working with physicians. We have a
unique opportunity to give physicians a meaningful voice in the
consolidation of healthcare. Together, we would embark on a
strategy to build the most comprehensive provider of outsourced
clinical services. We would also be better positioned for the
future and to be the trusted partner to health systems and payers
in coordinating care and reducing cost across the healthcare
system. Ultimately, we believe our health system clients, payers
and physicians will be highly supportive of our combination as they
share the same vision we do. The combination of TeamHealth and
AmSurg is compelling strategically and financially, and our Board
of Directors and management team are committed to working with you
to pursue a merger of our two companies.
As you know, we have fully integrated the
Sheridan acquisition successfully. The financial performance of
AmSurg since closing has exceeded our initial public guidance on
every major metric. Additionally, we have achieved these results
without disruption to the organizations of either legacy company.
We believe that experience, along with the overall size and
diversification of our combined companies, can add tremendous value
to the IPC integration and help de-risk the execution to TeamHealth
shareholders. Engaging now also gives us the opportunity to further
enhance shareholder value by optimizing the financing packages for
the AmSurg/TeamHealth and TeamHealth/IPC transactions to minimize
unnecessary, but meaningful transaction and financing expenses of
more than $100mm. By leveraging these financing synergies, the
combined company is better positioned for growth and infrastructure
investments. In order to reduce potential breakage costs for debt
incurred by TeamHealth to finance the IPC Acquisition (which would
likely need to be refinanced in the event of an AmSurg/TeamHealth
business combination) and to avoid potential disclosure issues
regarding negotiations for an AmSurg/TeamHealth business
combination in connection with marketing the new TeamHealth debt,
we have engaged in discussions with J. P. Morgan Securities LLC
about arranging replacement debt financing for TeamHealth and J.P.
Morgan has issued to us a “highly confident letter” which is
attached as Exhibit A hereto. J.P. Morgan is prepared to discuss
with you and any of your other potential financing sources
replacement financing on the terms described in the highly
confident letter.
We have spent significant time exploring the
merits of this potential transaction. We analyzed the relative
growth prospects and valuation of the two companies – as well as
incremental benefits of combination – and this analysis has
solidified our view that AmSurg and TeamHealth are ideal partners.
Our Board of Directors is fully supportive of this proposal. We are
also very confident that our respective shareholders will be highly
supportive of a merger as outlined in this letter—particularly
given the substantial shareholder overlap between our two
companies.
Taking all of these factors into account, we
are proposing a merger that reflects our respective strategic and
financial contributions to create the best in class provider of
outsourced clinical services.
1. Merger Terms: A stock-for-stock
merger at an exchange ratio of 0.768x, which implies a pro forma
ownership split of 50%/50% and which would enable both companies’
shareholders to share in the upside of the combined business as
equal partners. Additionally, TeamHealth shareholders would receive
cash consideration equal to $11.49 per share, which is
approximately 22% of TeamHealth’s current market capitalization.
This proposal implies a current value of $74.85 per share and a
premium of 42% based on closing prices on Oct. 9, 2015. While we
recognize the equity markets have been turbulent, we believe this
offer, at a value greater than TeamHealth’s all-time high,
represents a compelling opportunity for all of our shareholders.
Further, though TeamHealth has experienced a recent decline in its
share price—even since our face to face meeting on September 30th —
we are proposing the same economic terms we proposed in that
meeting. Simply put, this proposal is in no way intended to be
“opportunistic” relative to short-term stock price movements.
At the average of current peer trading
multiples and with $200mm of pro forma synergies (which includes
the announced $60mm of TeamHealth/IPC synergies), we believe this
proposal would result in total value per share to TeamHealth’s
shareholders of approximately $83.00 (a premium of approximately
57% to TeamHealth’s current)—well in excess of the “headline”
price. This structure provides your shareholders liquidity and
certainty for a significant portion of their current holdings in
TeamHealth, while preserving equal participation in the future
upside of the combined company.
2. Strategic Rationale & Key Drivers
of Value
- Pursuing a combination now creates
substantial opportunities for combined company
- Control the combined company’s position
in a consolidating industry
- Enhance synergies from the IPC deal
with synergies from an AmSurg/TeamHealth combination
- Reduce risks of standalone IPC
integration with AmSurg’s integration experience from Sheridan
- Most comprehensive provider of
outsourced physician services to health systems
- Largest national provider of outsourced
physician services
- Industry leading physician
sub-specialties across the continuum of care (surgical to medical
home)
- Provide the most robust suite of
integrated system solutions to healthcare systems
- Best positioned to capitalize on trend
towards more comprehensive health system relationships
- Powerful combination with new and
expanded opportunities to accelerate growth
- Breadth and depth of services
accelerates cross-sell and new contract wins
- Broader geographic presence and greater
scope of care expands universe of acquisition candidates
- Move to a “solutions” provider to
health systems creates opportunities to expand into new areas
- Enhance relationships with health
insurers in the midst of increasing consolidation
- Aligned with the future: Best
positioned to enable providers transition to value based care
- Network of over 1,600 hospitals and
employ ~20,000 physicians
- Best positioned to coordinate care and
reduce costs to the healthcare system
- Best partner to help navigate new
payment models and provider risk-sharing
- At the forefront of key fee for value
initiatives such as Bundled Payments for Care Initiatives
- Becomes an “enabling provider” with
services delivered across the continuum of care
- Capabilities to manage patients from
hospital to home
- Value of the hospitalist as care
coordinator will only increase
- Potential to significantly enhance
shareholder value with both sides equally sharing in upside
- Highly compelling strategically
- New and expanded opportunities
accelerating growth
- Significantly enhanced free cash flow
to support future growth
- Highly attractive risk profile with
diversified business offerings
- Meaningfully accretive to earnings with
significant synergies: $200mm+
3. Financing: We do not expect the
final terms of a definitive merger agreement to include a financing
condition. Our financial advisors, Guggenheim Partners and J.P.
Morgan, are highly confident in the ability to finance the proposed
combination of AmSurg and TeamHealth, as well as the pending
acquisition of IPC (attached as Exhibits A & B). We are eager
to work with you to refine the appropriate capital structure for
the combined company.
4. Due Diligence: Our proposal
is based solely on publicly available information and our own
internal management estimates. We appreciate that each party will
need to perform due diligence to better appreciate the
opportunities and risks of the other and form a view on the
potential of the combined business (mutual due diligence). We look
forward to working together to develop a due diligence plan that
minimizes any disruption to either business and that will not
disrupt or delay the pending acquisition of IPC. We are prepared to
immediately assign appropriate resources to the due diligence
effort and to begin negotiating definitive agreements during the
due diligence period. We are confident in our respective abilities
to sign definitive agreements within 30 days following the
commencement of due diligence.
5. Conditions and Approvals: While the
terms of any potential transaction would be set forth in the
definitive agreements, we would expect the merger to be subject to
customary conditions, including a shareholder vote at both
companies as well as obtaining required regulatory approvals.
6. Contract Terms: We would expect
that any definitive agreement would contain representations,
warranties and covenants, including with respect to deal
protections, customary for transactions of this type.
This letter is not intended to create or
constitute any legally binding obligation, liability or commitment
by us regarding a transaction or any other matter. There will be no
legally binding agreement between us regarding a transaction unless
and until a definitive agreement is executed.
It is the right time to put our companies
together to create maximum, long-term value for shareholders of
TeamHealth and AmSurg. We are all well aware of the consolidation
that is reshaping the broader healthcare landscape and share the
belief that we are at the precipice of consolidation in our sector
as well. We are also aware that the combination we propose in this
letter is not your only strategic option, nor is it ours. Having
said that, we believe it is the right combination for both
companies. Moving expeditiously and deliberately would enable us to
proactively shape our shared role in this rapidly consolidating
environment.
We are very excited by the prospect of
combining our two businesses and believe, if presented for
consideration, the combination will be extremely attractive to and
compelling for the shareholders of both AmSurg and TeamHealth. It
is our strong desire to engage with you directly in a constructive
transaction dialogue. We believe time is of the essence and the
first mover advantage will drive significant incremental value. We
look forward to moving expeditiously toward a successful
transaction.
Please feel free to contact me with any
questions or concerns. I look forward to your response.
Yours truly,
Christopher A. HoldenPresident and Chief
Executive Officer
Conference Call, Webcast, Investor Presentation
AmSurg Corp. will hold a conference call Tuesday, October 20,
2015, at 8:30 a.m. eastern time. The dial-in number is (719)
325-2356, pass code 7964659. Presentation materials related to the
conference call will be available on the Company’s web site,
www.amsurg.com, by following the link to Investors. A telephonic
replay of the conference call will be available through midnight on
October 26, 2015, by dialing (719) 457-0820 and entering pass code
7964659. Investors will also have the opportunity to listen to the
conference call over the Internet by going to the Company’s web
site and following the link to Investors at least 15 minutes early
to register, download, and install any necessary audio software.
For those who cannot listen to the live broadcast, a replay will be
available at these sites shortly after the call and continue for 30
days.
About AmSurg Corp.
AmSurg’s Ambulatory Services Division acquires, develops and
operates ambulatory surgery centers in partnership with physicians
throughout the U.S. AmSurg’s Physician Services Division, Sheridan,
provides outsourced physician services in multiple specialties to
hospitals, ASCs and other healthcare facilities throughout the
U.S., primarily in the areas of anesthesiology, children’s
services, emergency medicine and radiology. Through these
businesses as of June 30, 2015, AmSurg owned and operated 250 ASCs
in 34 states and provided physician services to more than 350
healthcare facilities in 27 states. AmSurg has partnerships with,
or employs, over 5,000 physicians in 38 states and the District of
Columbia.
Forward-Looking Statements
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934, as amended. These
forward-looking statements include, but are not limited to,
statements regarding AmSurg’s proposed business combination
transaction with TeamHealth (including financing of the proposed
transaction and the benefits, results, effects and timing of a
transaction), all statements regarding AmSurg’s (and AmSurg’s and
TeamHealth’s combined) expected future financial position, results
of operations, cash flows, financing plans, business strategy,
budgets, capital expenditures, competitive positions, growth
opportunities, plans and objectives of management, and statements
containing the words such as “anticipate,” “approximate,”
“believe,” “plan,” “estimate,” “expect,” “project,” “could,”
“would,” “should,” “will,” “intend,” “may,” “potential,” and other
similar expressions. Statements in this press release concerning
the business outlook or future economic performance, anticipated
profitability, revenues, expenses or other financial items, and
service line growth of AmSurg (and the combined businesses of
AmSurg and TeamHealth), together with other statements that are not
historical facts, are forward-looking statements that are estimates
reflecting the best judgment of AmSurg based upon currently
available information.
Such forward-looking statements are inherently uncertain, and
shareholders and other potential investors must recognize that
actual results may differ materially from AmSurg’s expectations as
a result of a variety of factors, including, without limitation,
those discussed below. Such forward-looking statements are based
upon management’s current expectations and include known and
unknown risks, uncertainties and other factors, many of which
AmSurg is unable to predict or control, that may cause AmSurg’s
actual results, performance or plans with respect to TeamHealth, to
differ materially from any future results, performance or plans
expressed or implied by such forward-looking statements. These
statements involve risks, uncertainties and other factors discussed
below and detailed from time to time in AmSurg’s filings with the
Securities and Exchange Commission (the “SEC”).
Risks and uncertainties related to the proposed transaction with
TeamHealth include, but are not limited to, uncertainty as to
whether AmSurg will further pursue, enter into or consummate the
transaction on the terms set forth in the proposal or on other
terms, potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
transaction, uncertainties as to the timing of the transaction,
adverse effects on AmSurg’s stock price resulting from the
announcement or consummation of the transaction or any failure to
complete the transaction, competitive responses to the announcement
or consummation of the transaction, the risk that regulatory,
licensure or other approvals and financing required for the
consummation of the transaction are not obtained or are obtained
subject to terms and conditions that are not anticipated, costs and
difficulties related to the integration of TeamHealth’s businesses
and operations with AmSurg’s businesses and operations, the
inability to obtain, or delays in obtaining, cost savings and
synergies from the transaction, unexpected costs, liabilities,
charges or expenses resulting from the transaction, litigation
relating to the transaction, the inability to retain key personnel,
and any changes in general economic and/or industry specific
conditions.
In addition to the factors set forth above, other factors that
may affect AmSurg’s plans, results or stock price including, but
not limited to, the following risks: AmSurg may face challenges
managing its physician services division as a new business and may
not realize anticipated benefits; AmSurg may become subject to
investigations by federal and state entities and unpredictable
impacts of the Health Reform Law; AmSurg may not be able to
successfully maintain effective internal controls over financial
reporting; AmSurg may not be able to implement its business
strategy, manage the growth in its business, and integrate acquired
businesses; AmSurg’s substantial indebtedness and restrictions in
its debt instruments could adversely affect its business or its
ability to implement its growth strategy, or limit its ability to
react to changes in the economy or its industry; AmSurg may not
generate sufficient cash to service its indebtedness; regulatory
changes may obligate AmSurg to buy out interests of physicians who
are minority owners of its surgery centers; AmSurg may not be able
to successfully maintain its information systems and processes,
implement new systems and processes, and maintain the security of
those systems and processes; AmSurg may be subject to litigation
and investigations and liability claims for damages and other
expenses not covered by insurance; AmSurg may be required to
write-off a portion of its intangible assets; payments from
third-party payors, including government healthcare programs, may
decrease or not increase as AmSurg’s costs increase; there may be
adverse developments affecting the medical practices of AmSurg’s
physician partners; AmSurg may not be able to maintain favorable
relations with its physician partners; AmSurg may not be able to
grow its ambulatory services revenue by increasing procedure volume
while maintaining operating margins and profitability at its
existing surgery centers; AmSurg may not be able to compete for
physician partners, managed care contracts, patients and strategic
relationships; adverse weather and other factors beyond AmSurg’s
control may affect its business; AmSurg may be adversely impacted
by changes in patient volume and patient mix; several client
relationships generate a significant portion of AmSurg’s physician
services revenues; AmSurg’s physician services contracts may be
cancelled or not renewed or AmSurg may not be able to enter into
additional contracts under terms acceptable to it; reimbursement
rates, revenue and profit margin under AmSurg’s fee-for-service
physician services payor contracts may decrease; AmSurg may not be
able to timely or accurately bill its services; AmSurg may not be
able to enroll its physician services providers in the Medicare and
Medicaid programs on a timely basis; AmSurg’s strategic
partnerships with healthcare providers may not be successful;
AmSurg may not be able to successfully recruit and retain
physicians, nurses and other clinical providers; AmSurg may not be
able to accurately assess the costs it will incur under new
contracts; AmSurg’s margins may be negatively impacted by
cross-selling to existing clients or selling bundled services to
new clients; AmSurg may not be able to enforce non-compete
agreements with its physicians and other clinical employees in some
jurisdictions; there may be unfavorable changes in regulatory,
economic and other conditions in the states where AmSurg operates;
legislative or regulatory action may make AmSurg’s captive
insurance company arrangement less feasible or otherwise reduce its
profitability; AmSurg’s reserves with respect to its losses covered
under its insurance programs may not be sufficient; and the other
risk factors are described in AmSurg’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2014, as updated by other
filings with the Securities and Exchange Commission. Consequently,
actual results, performance or developments may differ materially
from the forward-looking statements included above. AmSurg
disclaims any intent or obligation to update these forward-looking
statements.
Additional Information
This press release is provided for
informational purposes only and does not constitute an offer to
purchase or the solicitation of an offer to sell any securities.
Subject to future developments, AmSurg may file a registration
statement and/or tender offer documents with the SEC in connection
with a possible business combination transaction with TeamHealth.
AmSurg and TeamHealth shareholders should read those filings, and
any other filings made by AmSurg with the SEC in connection with a
possible business combination, if any, as they will contain
important information. Those documents, if and when filed, as well
as AmSurg’s other public filings with the SEC, may be obtained
without charge at the SEC’s website at www.sec.gov and at AmSurg’s
website at www.amsurg.com.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151020005517/en/
Investors:AmSurg Corp.Claire M. Gulmi,
615-665-1283Executive Vice President and Chief Financial
OfficerorMedia:Sard Verbinnen &
CoJonathan Gasthalter/Jared Levy/David Millar,
212-687-8080
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