UnitedHealth snares health-care business, Vista Equity to buy
education unit
By Anna Wilde Mathews and Laura Cooper
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 30, 2017).
The Advisory Board Co. will be split up and sold in a deal
valued at around $2.21 billion, with its health-care business going
to UnitedHealth Group Inc. and its education unit to private-equity
firm Vista Equity Partners Management 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 they were undervalued
and it wanted to engage in a dialogue with the company's board.
The companies said 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 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.
Eric Murphy, the chief executive of OptumInsight, the unit that
will absorb Advisory Board, said there are "terrific synergies"
between the two companies, with the acquisition bringing research
and other capabilities that Optum doesn't currently have.
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 such as
UnitedHealthcare, the insurance unit of UnitedHealth.
Michael J. Dowling, chief executive of Northwell Health, a big
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.
Rod Hochman, chief executive of Providence St. Joseph Health in
Seattle, a 50-hospital system that is a customer of Advisory Board
consulting, said he received a flurry of emails from Advisory Board
after the deal was announced Tuesday seeking to reassure customers.
Providence St. Joseph Health also sells health insurance in Oregon
and Texas, making it a competitor of UnitedHealth.
Mr. Hochman said Advisory Board must assure customers that
consultants will maintain their independence from UnitedHealth's
diverse businesses.
"We would want to make sure they keep their advice neutral," he
said. "I think time will tell."
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. Mr. Musslewhite
said it expected questions from some clients about the
UnitedHealthcare relationship, but "we'll be able to answer that
question easily." Optum has "been able to demonstrate a lot of
proof of the fact that they guard that very seriously," he
said.
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.
Melanie Evans contributed to this article.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Laura
Cooper at laura.cooper@wsj.com
(END) Dow Jones Newswires
August 30, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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