Cotiviti Holdings Inc (NYSE: COTV) is climbing in the market today, and for good reason. The company announced that it would be acquired at a relatively strong premium. Of course, the news excited investors, sending the stock on a run for the top. Today, we’ll talk about:
- The terms of the acquisition;
- what we’re seeing from the stock as a result; and
- what we’ll be watching for ahead.
COTV Announces Acquisition
As mentioned above, Cotiviti Holdings is having an incredibly strong start to the trading session this morning after announcing that it would be acquired. In a press release issued early this morning, the company announced that it has entered into a definitive agreement under which Verscend Technologies, Inc. has agreed to acquire all outstanding shares of Cotiviti.
Under the terms of the agreement, COTV shareholders will receive a payment of $44.75 per share in cash. Also, Verscend will be assuming all outsanding debt helpd by the company, resulting in a total enterprise value of about $4.9 billion. The price on the transaction represents a premium of 32% to the closing price per share as of June 4th and a 136% premium to the IPO price of the stock.
The combined business will operate as a private company within the healthcare and information technology sectors. It is believed that the acquisition will create a company that will help to increase affordability, reduce waste, and improve outcomes and quality for their customers. In a statement, Emad Rizk, M.D. President and CEO at Verscend, had the following to offer:
We are thrilled to partner with Cotiviti, which has become an important player in the growing and increasingly important and complex healthcare payment accuracy spac… Together, Verscend and Cotiviti will offer our clients a comprehensive, integrated end-to-end solution to address the estimated $900 billion in healthcare waste and abuse across the claims payment and care continuum. Financial data coupled with clinical data from our Risk Adjustment, Quality, and Population Health lines of business offer increased value to commercial payers, government entities, and providers.
The above statement was followed up by Doug Williams, CEO at COTV. Here’s what he had to offer:
We expect today’s transaction to deliver compelling value for Cotiviti shareholders and allow us to continue to execute our strategic growth plan. We are excited to be combining with Verscend, and believe that together we will create an organization with robust data assets, expanded offerings and innovative technologies that will allow us to bring a broader portfolio of new and existing payment accuracy analytical solutions to our valued customers.
Finally, Ramzi Musallam, CEO and Managing Partner at Veritas Capital, had the following to offer:
We believe Cotiviti is a perfect fit with both our investment strategy and with Verscend, and we look forward to taking the platform to the next level through this exciting combination… The aggregation of Cotiviti and Verscend’s complementary data sets and analytical capabilities, coupled with the unrelenting focus and commitment to support our customers, is expected to further drive value-added solutions and differentiated product development.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to work in the market is that the news causes moves. In the case of Cotiviti, the news proved to be overwhelmingly positive. After all, an acquisition at a strong premium means an immediate return of value for shareholders. So, it’s no surprise to see that shareholders are excited, sending the stock upward. At the moment (10:30), COTV is trading at $43.91 per share after a gain of $4.04 per share or 10.13% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on COTV. In particular, we’re interested in following the story surrounding the company’s acquisition. While the agreement has been signed and is definitive, the transaction is still subject to customary closing conditions. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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