Envision’s ambulance unit fields first-round offers

Envision Healthcare Corp.‘s process to divest its medical-transportation unit is advancing toward what could ultimately produce a deal worth well over $2 billion.

First-round proposals for the Envision subsidiary known as AMR, or American Medical Response, were submitted last week, Buyouts has learned.

Financial sponsors and two PE-backed air-medical-transportation platforms — American Securities LLC’s Air Methods and KKR’s Air Medical Group Holdings — are in the running for the unit, sources familiar with the matter said.

Guggenheim Securities is providing financial advice to the sellers, the sources said. Guggenheim knows the seller well, having advised AmSurg Corp. when it combined with Envision Healthcare Holdings in a merger-of-equals transaction last year.

The combined physician services supergroup now trades on the New York Stock Exchange under the symbol EVHC, with a current market cap of about $6.75 billion.

AMR ought to trade for an 8x multiple of EBITDA if sold to a financial buyer, whereas a 9x multiple of EBITDA is possible should it select one of the PE-backed strategics, one of the sources said.

Envision is said to be marketing the business off of EBITDA in the ballpark of $250 million to $290 million, suggesting a $2 billion-plus transaction if a deal is reached.

In its Q1 earnings release posted earlier this month, Envision trimmed its full-year 2017 adjusted EBITDA guidance range — accounting for the removal of its $290 million estimated contribution from the medical transportation arm, among other things. The update reflected its decision to move AMR as discontinued operations. AMR generated revenue and EBITDA of about $594 million and $72 million, respectively, during its first quarter.

Envision in its 2016 full-year earnings report first unveiled plans to explore strategic options for both its AMR business and its population health unit, Evolution Health. In its Q1 report it subsequently indicated that it had formally launched a process to divest AMR.

The Envision management team has been publicly outspoken about the challenging integration of Rural/Metro Corp, for which AMR forked out $620 million cash in 2015. The price tag reflected an about 11x multiple of pro-forma adjusted EBITDA of $58 million, an SEC filing disclosed.

Warburg Pincus took Rural/Metro private in 2011 for $738 million, including about $525 million in debt financing and $213 million of equity, according to Moody’s.

Rural/Metro filed for Chapter 11 bankruptcy in August 2013, citing its high leverage, aggressive contract bidding and revenue recognition issues. The company emerged from bankruptcy in December 2013 after winning a $135 million infusion from lenders and bondholders — following which Warburg no longer held an equity interest.

AMR says it is the country’s largest medical-transportation provider, encompassing more than 28,000 clinicians and a fleet of more than 6,600 ambulances. The business also manages and dispatches air ambulances and contracted vehicles.

The process for Envision’s AMR comes less than a month after American Securities completed its take private transaction for Air Methods in a deal that valued the medical helicopter company at about $2.5 billion including debt.

Meanwhile, another provider of emergency air medical services, Air Medical Resource Group, is in the midst of a Wells Fargo Securities-run sales process, as Buyouts reported in February.

The auction for privately held AMRG is likely to produce a sale to a financial buyer or one of the big PE-backed platforms, sources have said.

Representatives with Guggenheim and American Securities declined to comment, while those with Envision and KKR and didn’t immediately return requests for comment.

Action Item: Touch base with Envision’s Bob Kneeley, VP investor relations, at bob.kneeley@evhc.net

Photo courtesy of Keith Brofsky/Digital Vision/Getty Images