TeamHealth bought by Blackstone Group for $6.1 billion -AND- Blackstone purchase of TeamHealth offers turnaround promise outside of public view

CAL/AAEM News Service at
Mon Nov 21 13:37:47 PST 2016



October 31, 2016


TeamHealth bought by Blackstone Group for $6.1 billion 



mpaign=financedaily> Modern Healthcare



By Dave Barkholz 


Physician-staffing giant TeamHealth has agreed to be purchased by affiliates
of the Blackstone Group for $6.1 billion.


Blackstone, one of the nation's largest private equity groups, intends to
pay $43.50 per share for TeamHealth, which changed its CEO last month in
light of slumping earnings and stock price.


The Blackstone price is an 18% premium above TeamHealth's Friday closing
stock price of $36.85.


Hedge fund Jana Partners has pledged to sell its nearly 8% stake in
TeamHealth as part of the deal. Early this year, Jana fought for and won
three board seats at TeamHealth after criticizing management and the board
of directors for strategic missteps in guiding the company. Jana is
TeamHealth's third-largest shareholder. The largest is Wellington Management
with 7.1 million, or 9.8%, of the outstanding shares. Fidelity Management &
Research is next at 6.7 million share, or 9.1%.


The board takeover resulted in TeamHealth in September replacing longtime
CEO Michael Snow with former LifePoint Health Chief Financial Officer Leif


"We are pleased to reach this agreement with Blackstone, which maximizes
value for all TeamHealth stockholders," Murphy said in a release.


Blackstone executives said they were looking forward to taking TeamHealth
through its next phase of growth.


"TeamHealth has built an industry-leading physician-services platform that
is ideally positioned to enable its hospital partners and clinicians to
navigate the evolving healthcare landscape while providing outstanding
service to its patient," said Bruce McEvoy, a senior managing director at


The merger agreement includes a "go-shop" period. That means TeamHealth and
its board of directors may evaluate and potentially enter negotiations with
parties that offer alternative proposals during a 40-day period following
the execution date of the definitive agreement.


Knoxville, Tenn.-based TeamHealth is soon to be surpassed as the nation's
largest physician-staffing company for hospitals when AmSurg and Envision
Healthcare complete a merger in November.


TeamHealth posted net income in its second quarter of $18.8 million, or
$0.25 diluted net earnings per share, compared with net earnings of $28.9
million, or $0.39 diluted net earnings per share, in the second quarter of


Revenue in the second quarter was $1.12 billion, a 28% increase over the
year-earlier quarter. TeamHealth said the increase was largely the result of
the $1.6 billion acquisition of IPC Healthcare late last year.


In contrast, the merger between AmSurg and Envision, scheduled to be
completed in November, will create a physician-staffing giant with combined
revenue of about $8.5 billion compared with TeamHealth's less than $5
billion in annual sales.


TeamHealth drew investor ire in late 2015 when management and the board
rejected a $5 billion merger offer from rival AmSurg.


At the time, TeamHealth's stock price was trading about $60 per share.


As earnings declined, the company's depressed stock price drew in Jana and
led to the replacement of Snow as CEO.


TeamHealth's board of directors is recommending that stockholders approve
the agreement, the company said in its release. TeamHealth is sending the
proxy statement of the deal to stockholders so a vote can be held at a
special meeting of stockholders "as soon as practicable." 




November 3, 2016


Blackstone purchase of TeamHealth offers turnaround promise outside of
public view 



mpaign=financedaily> Modern Healthcare



By Dave Barkholz


Physician staffing giant TeamHealth is taking steps to heal its struggling
IPC division, an effort that under Blackstone ownership can be best
undertaken outside the glare of public equity markets, TeamHealth said.


In answer to questions posed to new TeamHealth CEO Leif Murphy, the company
said in a statement that management has created a separate leadership
structure to grow its presence in post-acute medicine.


And IPC, since its $1.6 billion acquisition a year ago, has been fully
integrated into TeamHealth.


That includes the integration of core systems such as information
technology, recruiting, contracting and sales so that IPC, whose physicians
serve in 2,000 post-acute facilities, can cross-sell services with
TeamHealth's traditional business of contracting physicians to acute-care


"We have achieved multimillion dollar synergies in both revenue and cost
with the integration of IPC," the company said.


The difficult melding of IPC into TeamHealth took a toll on TeamHealth
earnings and stock price over the past year, eventually leading to an
activist incursion of TeamHealth's board of directors this spring and the
retirement of long-time CEO Michael Snow in September.


Now, the Knoxville, Tenn.-based company, the nation's largest physician
staffing player, is being sold to Blackstone and taken private. The $6.1
billion deal was announced Monday.


Blackstone, one of the world's largest private-equity companies, is a
sophisticated financier willing to take a longer view of the company's
growth potential, TeamHealth said in its statement. Blackstone is paying
$43.50 per share for TeamHealth.


"The board and management team determined that we could better focus at this
time on our mission as the leading provider of hospital and post-acute
physician services by leaving the public markets with the distractions and
short term focus they have," the company said.


Blackstone is the majority owner of Change Healthcare, a healthcare IT
company in Nashville that is merging with McKesson's IT business to create a
healthcare services giant with annual revenue of about $3.4 billion.


When the deal is completed, expected sometime next year, Blackstone will
receive a $1.75 billion special dividend for the assets. It is contributing
that amount to the venture.


Fixing IPC was one of Murphy's top priorities in leaving his CFO post at
hospital chain LifePoint Health to become TeamHealth's CEO in September.


Asked about Murphy's future with TeamHealth under Blackstone ownership,
TeamHealth said the transaction was just announced and many major decisions
have yet to be made.


"But generally private-equity firms consider the strength and experience of
the management team before making any investment," TeamHealth said in its


Addressing analysts at the Wells Fargo Securities Healthcare Conference in
September, TeamHealth CFO David Jones pointed to cultural issues that
TeamHealth was having integrating IPC into TeamHealth.


Jones said IPC's post-acute doctors have higher turnover rates than
TeamHealth's emergency room physicians, hospitalists and anesthesiologists
because they can more readily return to private practice. He said their
salary structure also is different.


For example, Jones said, IPC physicians prior to joining TeamHealth had a
smaller percentage of their overall compensation in base salary than did
TeamHealth physicians, but they tended to be paid in bonuses and other
performance-based compensation.


Jones said TeamHealth is trying to bring the two models closer together, in
part, to improve physician recruitment at IPC. IPC and hospitalists
generally tend to have turnover in the 10% to 15% range. In contrast,
emergency room doctors and anesthesiologists, which represent a good portion
of TeamHealth's physician workforce, churn at rates of about 5% to 6%, he


The trouble TeamHealth had integrating IPC reflected in depressed earnings
and a stock price that fell from $59.71 on Nov. 10, 2015, to $33.56 per
share by Feb. 9.


That collapse drew in bargain-hunting hedge fund Jana Partners. The company
demanded three board seats to right the course of TeamHealth's "missteps" by
the board and management.


Jana ultimately got the seats and worked to replace Snow in September with


Now Jana is selling at a profit its 8% TeamHealth stake to Blackstone. 




Jeff Wells
Deputy Editor, CAL/AAEM News Service


Brian Potts MD, MBA
Managing Editor, CAL/AAEM News Service

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