June 14, 2016

Potential for Envision Healthcare-AmSurg Corp merger: Shares spike

Envision Healthcare Holding could be merging with AmSurg Corp.

A new merger deal could soon be on the horizon to combine two of the largest outsourced physician services providers in the country. Sources familiar with the matter revealed to Reuters that Colorado-based Envision Healthcare Holdings is in advanced merger talks with Nashville-based AmSurg Corp. Official confirmation of this deal could be announced as soon as next week, though neither organization has responded to media inquiry requests at this time.

When news of this potential merger arose on Thursday[use the specific date instead of day of the week[, Envision's shares spiked 9 percent, according to CNBC. Meanwhile, AmSurg's stock rose 3 percent. Just earlier this month, Envision Healthcare landed the number 469 place on the 2016 Fortune 500 list. This accomplishment marks Envision's first year earning a place on the illustrious list.

As the health care industry is increasingly consolidating to cut rising costs and improve patient quality of care, this merger could prove immensely beneficial for both companies in terms of profit margins and operating productivity. Meanwhile, though industry analysts are unclear about how the potential deal could be structured, KeyBanc analyst Jason Gurda told StreetInsider, that AmSurg could offer Envision a "mostly or all-stock deal" at a "modest premium."

"Overall, we believe the benefits of merging the two companies are likely to be relatively modest and would likely come from: 1) the opportunity to cross-sell EVHC's emergency room physician business and AMSG's anesthesiologist physician business; and 2) some corporate overhead savings," Gurda explained to the source. "We believe there is less rationale for combining the other parts of the two companies, i.e., EVHC's ambulance business and AMSG's ambulatory surgery chain business."

Last year, AmSurg offered an unsolicited takeover bid estimated around $5 billion to fellow industry leader, Team Health Holdings, yet quickly withdrew the bid once Team Health denied the offer.[according to who? this doesn't appear in StreetInsider, but the placement and lack of attribution would lead a read to mistakenly believe it was sourced from there]