Civitas Solutions Inc. (NYSE: CIVI) — a large provider of home- and community-based services to individuals with intellectual and developmental disabilities (I/DD), as well as a range of other needs — has entered into a definitive merger agreement to be acquired by funds advised by Centerbridge Partners L.P.
Under terms of the agreement, announced Tuesday, Centerbridge will acquire all outstanding shares of Civitas common stock for $17.75 in cash per share, resulting in an enterprise value of about $1.4 billion.
Founded in 1980, Boston-based Civitas Solutions markets its services nationally as The Mentor Network, operating across 36 states. As of June 30, 2018, the company provided services to more than 12,500 individuals in residential settings and more than 19,000 individuals in non-residential settings.
The merger agreement was unanimously approached by Civitas’ board of directors. The transaction is expected to be completed toward the end of the second quarter of 2019, though completion is subject to shareholder approval.
“We are excited about this transaction, which follows a thorough review of alternatives by our board of directors,” Bruce Nardella, president and CEO of Civitas, said in a statement. “This transaction delivers significant value for our shareholders and strengthens our ability to execute our long-term growth strategy and fulfill our mission through the expansion of high-quality, cost-effective services.”
With offices in New York and London, Centerbridge Partners is a private investment management firm with roughly $27 billion in capital under management.
Rumors regarding a possible sale of Civitas had previously surfaced in October.
Following the deal announcement, Civitas shares were up more than 10% on Wednesday to $17.56 per share. Momentum had cooled somewhat by Friday morning, with Civitas shares down slightly to $17.44 per share.
PE firm Vestar Capital Partners owns more than half of Civitas Solutions.
Civitas eventually agreed to a $17.75 per share valuation, despite previous analyst estimates that the company could have achieved one closer to $20 per share.
“While our LBO [leveraged buyout] analysis suggested a potential justification of a higher price, we believe $17.75 is reasonable given trading ranges prior to earnings last week,” a research note provided to Home Health Care News from Raymond James & Associates stated. “On this point, the price represents a 40.6% premium to the pre-earnings close and a 13.5% premium to Tuesday’s close, which we view as encapsulating a reasonably high amount of deal speculation.”
Barclays is acting as financial advisor to Civitas, with Kirkland & Ellis LLP serving as legal advisor. Cain Brothers, a division of KeyBanc Capital Markets, UBS Securities LLC, and Goldman Sachs & Co. LLC are acting as financial advisors to Centerbridge. Goodwin Procter LLP and Simpson Thacher & Bartlett LLP are serving as its legal advisors.
Goldman Sachs & Co. LLC, UBS Securities LLC, RBC Capital Markets, LLC and KeyBanc Capital Markets have provided committed financing for the transaction.
Civitas declined a request for comment from Home Health Care News.
Written by Robert Holly