AmSurg is again casting for a giant merger partner, this time Envision Healthcare Holdings, according to published reports Wednesday.
The rival physician staffing and healthcare services companies are in advanced talks to merge, the Wall Street Journal first reported, citing anonymous sources.
Nashville-based AmSurg made about $1 billion of acquisitions last year, mostly buying practices of physicians who serve in hospitals in anesthesia, emergency medicine, neonatology and radiology.
But last year, AmSurg failed in its bid to acquire TeamHealth, the nation's largest physician staffing company, in a deal valued at more than $5 billion.
The Wall Street Journal said a deal with Envision could be announced as early as next week. Envision's stock price Thursday jumped $2.15, or 8%, to close at $27.80. AmSurg also posted a gain. It rose $3.09, or 4%, to close at $81.
AmSurg was largely an owner and operator of ambulatory surgery centers until it bought physician staffing giant Sheridan Healthcare in 2014 for more than $2 billion.
Greenwood, Colo.-based Envision is a big player in physician staffing as well as ambulance services.
The company spent the end of 2015 terminating or cleaning up money-losing hospital contracts before beating analyst expectations in the first quarter with an 18% rise in adjusted EBITDA to $151.6 million and a jump in revenue of 28% over the year-earlier quarter to $1.6 billion.
The market value of Envision's shares is about $4.75 billion. In after-hours trading, AmSurg's shares were down more than 2% to $75 as of 7 p.m. ET, more than giving back Wednesday's gain in trading.
AmSurg in its first quarter posted adjusted EBITDA of $120.1 million, up 28% from the same period a year ago. Revenue in the quarter jumped 27% to $724.7 million from $570.4 million in the first quarter of 2015.
At the Jefferies Healthcare Conference on Wednesday, AmSurg CEO Chris Holden told analysts that government and commercial payer pressure on physicians to prove their quality is what's driving doctors to seek large partners like AmSurg.
He said there are still 2,000 independent anesthesiology groups operating that offer consolidation opportunities.
Holden made reference to the TeamHealth offer last year as an attempt to create a super-group, adding that super-groups will happen whether it occurs in the next year or five years down the road.
The benefits of a merger would be “relatively modest,” KeyBanc analyst Jason Gurda told StreetInsider.com. Gurda remarked that a combination would create some cross-selling opportunities for Envision to win emergency-room physician staffing contracts in hospitals where AmSurg has a presence and for AmSurg to seek anesthesiology business where Envision is strong.
Additionally, there might be some corporate overhead savings, Gurda noted.
“Although it is not clear how a deal would be structured, relatively high levels of debt at both companies suggest that it would largely be financed via stock rather than cash,” he said. “Based on back of the envelope math, we believe the opportunity for near-term accretion is low.”