Surgery Partners Stock Soars 46% as Bon Secours Affiliate Agrees to $5.7 Billion Deal to Take Company Private

Shares of Surgery Partners Inc. jumped nearly 46% on Monday. The outpatient surgery operator agreed to be acquired by an affiliate of Bon Secours Mercy Health in an all-cash deal that values the company at about $5.7 billion including debt.

Surgery Partners shares rose $7.23 to $22.98 in morning trading on the Nasdaq. More than 23 million shares had changed hands by mid-morning, roughly 10 times the stock's three-month daily average of about 2.25 million. The gain lifted the company's market value to about $3 billion.

Even after Monday's jump, the stock is down about 31% over the past 52 weeks.

Deal terms

Under the agreement, HealthSpan Partners will pay $23.50 a share in cash to all shareholders except affiliates of Bain Capital, Surgery Partners' largest investor. HealthSpan Partners is a contractual affiliate and supporting organization of Bon Secours Mercy Health, one of the largest Catholic health systems in the United States.

The offer is about 49% above Friday's closing price of $15.75. On Monday the stock traded slightly below the offer price, a gap that typically reflects the time needed to close a deal and the risk that it falls through.

Bain Capital affiliates own about 39% of Surgery Partners' shares and have been investors since 2017. They will not sell; instead they will roll their stake into equity in the acquiring entity. Bain has signed a voting and support agreement to back the transaction and will remain a significant partner after the deal closes.

HealthSpan plans to pay for the acquisition with cash on hand and new debt. It said its debt financing commitments are secured, with Jefferies acting as sole initial underwriter.

A special committee of independent directors led the negotiations. The full board approved the deal after the committee's unanimous recommendation.

"We believe this transaction represents the best path forward for Surgery Partners," Chief Executive Eric Evans said in a statement.

John M. Starcher Jr., chief executive of Bon Secours Mercy Health, said: "Our relationship with Surgery Partners represents an important step toward advancing that commitment."

The companies expect the deal to close in the first quarter of 2027. Closing requires approval from Surgery Partners shareholders, regulatory clearance and other customary conditions. Once the deal is complete, Surgery Partners will be delisted from Nasdaq and become privately held. Its name, brand and headquarters are expected to stay the same.

Higher than reported price

The final price was well above early reports. On Sunday, the Financial Times reported that Bon Secours was nearing a deal to buy a majority stake at about $20 a share, citing people familiar with the matter. Surgery Partners shares rose more than 21% in premarket trading on that report, then climbed further after the companies confirmed the $23.50-a-share price.

The agreement follows a failed attempt at a deal last year. Surgery Partners walked away from a Bain-led proposal to take the company private, which valued it at about $6.7 billion including debt.

Shift toward outpatient care

Surgery Partners, based in Brentwood, Tennessee, operates ambulatory surgery centers and surgical hospitals across the United States. These facilities perform procedures in orthopedics, ophthalmology, gastroenterology and other specialties outside of traditional hospitals.

Health systems and insurers have been moving more procedures to outpatient settings, which are generally cheaper than inpatient hospital care. That shift has made surgery center operators attractive targets for hospital groups and private equity firms looking to expand their outpatient networks.

Bon Secours Mercy Health, based in Cincinnati, operates hospitals and other facilities in several U.S. states and in Ireland. The deal would substantially expand its footprint in outpatient surgery.

Debt and stock weakness

Surgery Partners has carried a heavy debt load. Reports put its debt at about $3.5 billion, which has weighed on the stock as interest rates stayed high.

Before Monday, the shares had fallen sharply over the past year amid concerns about leverage, reimbursement pressures and slower growth in some markets. The take-private offer gives shareholders a cash exit at a substantial premium to recent trading levels.

Market backdrop

The deal was announced as investors prepared for a busy week. The Federal Reserve will announce its interest rate decision on Wednesday. Major technology companies, including Alphabet, Microsoft and Amazon, are due to report quarterly earnings.

Healthcare deal activity has picked up this year as buyers look for growth in outpatient and specialty care. Investors will be watching for any rival bids before the shareholder vote.

_This article is for information only and does not constitute financial advice._