The Advisory Board Co. will be split up and sold in a deal worth around $2.21 billion, with its health-care business going to UnitedHealth Group Inc. and its education unit to private-equity firm Vista Partners LLC.
The consulting and software company had announced in February that its board was exploring strategic alternatives, including a possible sale. That move came after activist hedge fund Elliott Management Corp. said it and related entities had bought about 8.3% of the company's shares, saying at the time that they were undervalued and it wanted to engage in a dialogue with the company's board.
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The companies said that the total value of the deal was around $2.58 billion, a figure that includes the assumption of debt. Advisory Board shareholders will get approximately $54.29 in cash per share, which includes a fixed payment of $52.65 per share in addition to the estimated after-tax value of the Advisory Board's stake in Evolent Health Inc.
Vista will pay about $1.55 billion for EAB, the education unit, which focuses largely on colleges and universities. After that deal closes, UnitedHealth will complete its acquisition of the Advisory Board's health operation, which goes by the name of the parent company, paying $1.3 billion including the assumption of debt.
The Advisory Board, which is a well-known name in the hospital industry, had around $803 million in revenue last year. For the second quarter of 2017, it reported net income of $14.7 million, or 36 cents per share, compared with $7.5 million, or 18 cents a share, a year earlier. Shares closed at $49.85 on Monday.
The Advisory Board, a well-known name particularly in the hospital industry, becomes the latest high-profile takeover for UnitedHealth's Optum health-services arm. Optum has grown rapidly over the years with an aggressive spate of acquisitions, bolting together everything from a burgeoning network of doctor practices to a major pharmacy-benefit manager to a large outpatient surgery company.
UnitedHealth said Robert Musslewhite, who is the chief executive of the Advisory Board parent company, will continue to lead its consulting work within Optum.
The acquisition may raise questions among some Advisory Board clients, who entrust their data to the firm and may rely on its work in their pricing negotiations with big insurers like UnitedHealthcare, the insurance unit of UnitedHealth.
Michael J. Dowling, chief executive of Northwell Health, a huge New York hospital system that is an Advisory Board client, said before the deal was announced that he would want to understand the details. "It would all depend as to what the nature of the relationship would be," he said. "You'd want to be able to be sure....that the data is protected and doesn't bleed into other entities." Northwell already has a good relationship with Optum, which he expects to continue, he said.
Optum itself is already a major adviser to hospitals, as well as insurers that compete directly with UnitedHealthcare. UnitedHealth has always said that Optum clients' information is walled off completely from the company's corporate sibling, and Optum has long been able to win business despite the relationship.
UnitedHealth said it expects to close the acquisition in late 2017 or early next year.
Vista Equity Partners invests in a software, data and technology-focused companies -- including a major education-related firm, PowerSchool, which provides software for the K-12 market. The investment firm recently closed its largest buyout fund, collecting over $11 billion in capital -- making it one of the largest technology-focused vehicles ever. Across its differentiated funds, the firm has raised over $30 billion to pursue deals.
With a large war chest, Vista has been active on the acquisition trail. After several deals to take companies private last year, the firm agreed to take-private Canadian financial technology company D+H Corp. for 2.7 billion Canadian dollars in March to merge with its portfolio company Misys Group Ltd. It also recently agreed to sell the communities and sports divisions of its portfolio company Active Network Inc. to Global Payments Inc. in a cash-and-stock deal valued at roughly $1.2 billion.
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(END) Dow Jones Newswires
August 29, 2017 08:57 ET (12:57 GMT)