Surgery Partners Deal Sweetened to $25 a Share as Board Turns Away a $28 Rival Bid

Surgery Partners and HealthSpan Partners on Monday raised their agreed takeover price, amending the deal two weeks after it was signed.

Stockholders other than Bain Capital affiliates will now receive $25.00 in cash for each share. The price replaces the $23.50 a share agreed on October 26.

The amendment values the transaction at up to about $6.0 billion in enterprise value. Enterprise value counts a company's debt alongside the value of its equity.

A ticking fee pays holders if closing slips

The amended agreement adds a ticking fee, extra cash that accrues while a deal waits to close. It starts only after stockholders approve the merger, if closing then slips past March 1, 2027.

The fee is paid in equal monthly installments in arrears. It accrues at 10% a year on the $25.00 merger consideration.

At the outside date of October 23, 2027, the fee could add up to $1.61 a share. That would lift the maximum consideration to $26.61 a share.

Bain rolls over and takes no cash

Bain Capital affiliates will receive no merger consideration, including no ticking fee. They will roll their shares into equity in the acquiring entity instead.

Bain remains a significant partner alongside HealthSpan after closing. It owns about 39% of the outstanding shares and is the company's largest stockholder.

Bain's voting and support agreement stays in place. Under it, Bain agreed to vote all of its shares for the HealthSpan merger.

Bain has held its stake since 2017, Reuters reported.

The board chose certainty over a higher headline price

The amendment followed an unsolicited, non-binding proposal from an unnamed third party. The bidder first offered $28.00 a share in cash on November 3 and updated the proposal on November 8.

“This transaction provides exceptional value for our stockholders, along with regulatory certainty and a closing expected in the near term,” Surgery Partners chief executive Eric Evans said.

A special committee of independent directors led the negotiations. It weighed the rival bid against the amended HealthSpan terms with financial and legal advisors.

The committee found the rival proposal would likely take materially longer to close, or might not close at all. It also cited greater regulatory risk and complexity.

The rival bid also lacked contractual protections the committee had sought. The committee unanimously decided it was not a Superior Proposal under the merger agreement.

The board then approved the amendment on the committee's recommendation. It reaffirmed its recommendation that stockholders vote for the HealthSpan merger.

Shares traded above the new cash price

Surgery Partners shares were $26.22 in intraday trading on Monday, up about 13%. The snapshot put Friday's close at $23.20 a share.

That level sits $1.22 above the $25.00 cash price, a desk calculation. It is an intraday reading, not a settled close.

The company filed the amendment with the SEC in a Form 8-K on Monday morning.

What the deal still has to clear

Closing is still expected in the first quarter of 2027. It requires Surgery Partners stockholder approval and regulatory approvals, plus other customary conditions.

HealthSpan still intends to finance the purchase with cash on hand and new debt. Commitments for that debt have been secured, the companies said.

Surgery Partners runs more than 200 locations across 30 states. They include ambulatory surgery centers, surgical hospitals, physician practices and urgent care sites.

The company will file a proxy statement and a Schedule 13E-3 transaction statement with the SEC. Neither had been filed when the amendment was announced.

What remains unknown

What remains unknown starts with the rival bidder. Neither company has named the third party or said whether it will return.

The stockholder vote date is also unknown. It will be set in the proxy statement the company has yet to file.

Whether regulators clear the deal on the expected first-quarter timeline is unknown. That timeline is what starts, or avoids, the ticking fee.

The vote and the rival are the next tests

What to watch: the proxy statement and Schedule 13E-3 filings. They will set the vote date and detail the committee's reasoning.

Any return by the unnamed bidder is the second test. A firmer, higher offer would force the board to weigh price against certainty again.

The closing calendar is the third test. Approval and a fast close pay $25.00 flat, while delay past March 1, 2027 starts the fee.