Envision rises amid report of private equity interest
Shares of Envision Healthcare (EVHC) are on the rise following a report by Bloomberg claiming the company has attracted buyout interest from private equity investors.
The hospital based physician group, which activist Starboard Value has targeted, had previously announced that it was exploring options to enhance shareholder value.
Meanwhile, Baird analyst Whit Mayo told investors that Envision could be worth in the area of $40 per share in a leveraged buyout, which is an estimated value that his peer at Keybanc also sees as possible.
PRIVATE EQUITY INTEREST
According to a report by Bloomberg, Envision has attracted buyout interest from firms including Carlyle Group (CG) and Onex Corp.
The two are among companies that may bid for Envision alone or as part of a group, the report added.
The health-services provider has been under pressure from activist investor Starboard Value, who revealed a stake in Envision in October and recommended the company as an attractive takeover target, Bloomberg noted.
In a research note to investors published prior to the release of Bloomberg’s report, Baird‘s Mayo noted that he would guess that about three to four hedge funds now collectively own about 20% of Envision Healthcare, with “potentially more in the shadows,” and that a leveraged buyout is “very doable” if one believes there is an investment case for industry volumes.
If there is a case seen for structural changes in volumes, cash collections and/or physician rate, Mayo sees the potential for “very acceptable returns” on a theoretical leveraged buyout in the $40 per share area, he contended.
#Mayo pointed out that he thinks the upside risk of a leveraged buyout is being “underappreciated,” and reiterated an Outperform rating and $35 price target on the shares.
Meanwhile, KeyBanc analyst Jason #Gurda told investors in a research note of his own that he also believes a private equity buyer could reasonably bid “in the low $40s” for Envision in a leveraged buyout.
The analyst noted that he was not surprised to hear of reports that there is private equity interest in the company as in the past there has been a considerable level of private equity investment in both of Envision’s business segments – physician services and ambulatory surgical centers. Gurda reiterated an Overweight rating on the stock, while raising his price target on the shares to $40 from $37.
In Tuesday’s trading, shares of Envision have jumped about 7% to $27.66. Year-to-date, however, the stock is still down over 56%.
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