Walgreens might be going private in the biggest EVER leveraged buyout
On November 11, KKR made a formal bid to buy out Walgreens, confirming earlier reports of the rumored deal. The buyout would be the largest-ever public-to-private transaction, valued at about $73 billion as things stand today. Walgreens shares rose more than 5% on the news.
Some are questioning whether KKR can even raise enough funding to cover that value, but if I had to guess, I’d say they know what they’re doing. Recent rumors have suggested that these talks have fizzled out somewhat. Stay tuned.
UnityPoint and Sanford Systems Call Off $11 Billion Planned Merger
Out in the midwest, UnityPoint’s board of directors pretty concretely rejected (WSJ) its proposed merger with Sanford health.
The combination would have created a 76-hospital giant with operations across 26 states and $11 billion in operating revenue, executives said in June.
The cancelled merger joins the trend of called-off health system transactions – Baylor and Memorial Hermann in Texas, and then Ascension and Providence St. Joe’s up north.
Novartis buys cholesterol meds.
Novartis, a $225 billion Swiss pharmaceutical company, is buying Medicines Company for about $10 billion, or $85 a share. What’s so special about the Medicines Company? They’re in the process of developing a cholesterol drug with tech called RNA interference.
Since the heart disease market is huge (cholesterol alone is expected to reach a $17.7 billion market by 2024), Novartis probably wants to get ahead of the new tech and combine the cholesterol drug with its own heart failure drug, Entresto.
Keep in mind that this deal comes on the heels of a landmark heart disease study released last week, which indicated that invasive surgery (AKA stents) is no more effective than drugs at treating heart disease.
Hooters Shifts into…Drug Development with Sonnet BioTherapeutics Merger
Hooters and Cancer Drugs.
Major props if you saw this deal coming. This week, Chanticleer holdings announced their intent to merge with Sonnet BioTherapeutics. You might be asking yourself, “what’s Chanticleer Holdings? Some type of other science-y research company?” and you would be very wrong. Chanticleer Holdings operates restaurants. Know of a restaurant named Hooters? That’s them. They’re planning to have Hooters girls double as lab technicians to create cost synergies for the merger.
Just kidding.
As part of the deal, Chanticleer is completely shifting into assisting Sonnet with its cancer drug development. Chanticleer is planning to spin off its restaurant holdings into a new public company. Markets seem to be big fans of the move – the Chanticleer stock shot up about 40% on the news.
Biotech and cancer drug development must be a pretty lucrative space if even Hooters is getting into it.
Google makes a play to acquire Fitbit and challenge Apple’s smartwatch dominance
A Bid for Fitbit.
Reuters reported that Google is making a bid to buy out Fitbit. It looks like the tech giant is trying to get into the wearables space, which has pretty much been dominated by the Apple Watch in recent years.
Despite creating its own watch software, I was surprised to learn that Google actually hasn’t developed its own watch yet. In order to accelerate any wearable’s time to market, Google is trying to sidestep any product startup and branding costs by simply buying Fitbit instead. Fitbit is probably happy about the news too, considering that their sales have been pretty weak lately.
The bigger picture: wearables, wellness, and improving health outcomes.
Even though wearables and their data haven’t really made any push into providing meaningful clinical data for providers, Google’s competitive bid for Fitbit just goes to show that they think there’s a big potential market here. As data tracking gets better and wearables tech improves, I wouldn’t be surprised to see significant progress with wearables and the intersection of wellness and preventive care.
Amazon Acquires Health Navigator
Amazon Care is taking shape.
In its first healthcare-related purchase since PillPack a year ago, Amazon acquired a company called Health Navigator this week. The company more or less tells employees where they should go seek care based on the symptoms that they have (i.e., do you have a nail in your foot? You should probably go to the ER!) among having other virtual care functions.
Employees Only.
Keep in mind that most of these big companies are piloting these healthcare initiatives mainly through employee-only programs (Walmart, Apple Clinics, now Amazon).
With these types of acquisitions, Amazon and others are first trying to save money on healthcare for their employees. They want to provide (hopefully) a better, more comprehensive health benefit to stay competitive in the recruiting market.
Then, if these pilot programs are successful with their employees, maybe they’ll find profitable ways to expand the services to us, too.
KKR’s Take-Private Offer for Quorum
Quorum Health, one of the five publicly traded hospital companies, received an offer letter this week from KKR, a private equity firm known for take-private buyouts.
The Terms.
KKR offered Quorum a $1.00 per share offer, which might even be generous considering the operator is down 79.0% on the year. Quorum management said they’d take the letter into consideration along with everything else, including their ginormous debt load.
The Bigger Picture: private equity is all over healthcare. Recent buyouts include Athenahealth, Kindred, Envision, and others. Even Walgreens had a take-private offer just a few weeks ago. All of these deals were priced in the billions of dollars.
OTHER M&A: Merck, a large biotech firm, is acquiring ArQule, a drug developer specializing in cancer treatments, for $2.7 billion. Biotech M&A is red hot hot HOT.
Starboard Value invests in CVS
A highly reputable activist investing firm called Starboard Value took a stake in CVS today, the WSJ reports.
The firm has a knack for improving operations with investments ranging across industries, including Macy’s and Papa John’s.
Starboard wants to sell Mednax
Starboard Value, a popular activist investment firm, wants Mednax to consider a company sale (WSJ paywall). Since Starboard owns a significant chunk of Mednax, they have a decent bit of power to try and make a sale happen.
It’s pretty clear why Starboard wants to pursue a sale strategy. If you had invested $100 in Mednax this year, you’d be down to $83. That’s AFTER this news broke, where the stock jumped 11% over the past 5 days. Recently, Mednax has been making efforts to refocus on its core physician business. Earlier this year, the firm sold its revenue cycle management business, MedData. Mednax is also working to improve its organizational structure.
Right now, the dialogue between Mednax and Starboard appears friendly, but things could turn ugly if Starboard doesn’t get what they want.
UnitedHealthcare buys Embattled Specialty Pharmacy, Diplomat for $300 Million
UnitedHealthcare’s 4-step guide to buying a specialty pharmacy:
- Compete with the pharmacy
- Undercut their business and disrupt their referral patterns
- See their operations and stock price tumble
- Buy them out at a discount.
Partners Acquires EyeCare Partners for $2.2 Billion
In a transaction valued at $2.2 billion, Partners Group, a private equity investment firm, is buying EyeCare Partners, which is one of the largest providers of eye services in the U.S.
Why this matters.
This transaction marks one of the first investment exits made by a private equity firm in the physician practice space.
- FFL Partners originally bought EyeCare Partners back in 2015, meaning its investment horizon was only 4 years.
- Over that 4 years, EyeCare Partners expanded to 453 locations in 2019 from 63 locations back in 2015. According to the WSJ, Its revenue grew an average of 65% per year over that same timeframe.
- EyeCare Partners was then sold for a very high price relative to its current earnings.
- If private equity can achieve returns on investment like this, they’re going to stick around healthcare for a while. And new entrants will come chasing those same returns.
Read more about the transaction: Here’s the source link from Partners and here’s the writeup from the WSJ.
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