PE Giant Looks to Buy Surgery Partners
The private-equity firm that already is the largest owner of Surgery Partners Inc. has offered to acquire the shares it doesn’t own via a deal that would value the surgical center operator at about $3.3 billion.
Officials with Bain Capital Private Equity LP, which controls 39.3 percent of Brentwood, Tennessee-based Surgery Partners, sent their proposal to the company’s board late on Jan. 27. The $25.75-per-share offer is not binding and the Bain team said in a filing with the Securities and Exchange Commission that they plan to discuss with Surgery Partners as well as third parties various scenarios around an “extraordinary corporate transaction” that could include acquisition proposals from other companies or investors.
In a letter to the board, Bain investors say their offer comes after the Surgery Partners board’s recent review of the company’s future, which included considering several potential transactions that didn’t make it to the finish line.
“We have reflected on these events and current investor sentiment and have concluded that our proposal is in the best interests of the company and its stockholders,” Bain Partners Devin O’Reilly and Andrew Kaplan wrote—while also noting that Bain isn’t interested at this point in a deal that would have it sell its stake.
Surgery Partners, which operates more than 200 facilities in 33 states and has about $3.1 billion in annual revenues, was the subject of takeover speculation last year. At the time, PE firm TPG Inc. and UnitedHealth Group Inc. were said to be eyeing the company.
In a Jan. 28 statement, Surgery Partners directors said a special board committee will look over Bain’s proposal, which they pointed out includes a provision requiring approval from a majority of the investors who own the roughly 60 percent of shares that Bain doesn’t.
In addition to Bain, fellow big investing names Fidelity Investments, Wellington Group and The Vanguard Group also own more than 5 percent of Surgery Partners’ stock. Combined, the latter three firms controlled about 27 percent of the company as of last spring.
Shares of Surgery Partners (Ticker: SGRY) popped from below $21 to more than $25 on word of Bain’s offer. (By way of context, they were trading above $31 in mid-November, when CEO Eric Evans and his team reported third-quarter results.) On the morning of Jan. 29, they were changing hands around $26, suggesting investors think other suitors will indeed appear. RBC Capital Markets analyst Ben Hendrix told clients Bain’s offer is likely to “accelerate interest” from other potential buyers, particularly since Surgery Partners shares are still below last fall’s levels.