- The Advisory Board Company will split its health and education services and sell both units — including the former to UnitedHealth Group — in a total deal valued at $2.58 billion including debt, The Wall Street Journal reports.
- UnitedHealth will complete its $1.3 billion acquisition of Advisory Board’s health operation after the education unit’s sale to Vista Equity Partners closes, which includes the assumption of debt and is expected later this year.
- Advisory Board announced in February it was considering a sale of the business. That was soon after activist investor Elliott Management acquired an 8.3% stake in the company. Its shares rose 6.2% to $52.95 in morning trading Tuesday, according to Reuters.
Rumors of UnitedHealth’s interest in Advisory Board’s health division surfaced last month, prompting a spike in Advisory Board's stock price. The company said it retained active healthcare members, but a decline in general healthcare revenue was troubling. In January, Advisory Board laid off 200 people, or about 6% of the healthcare staff.
The deal is one in a string of acquisitions by UnitedHealth’s Optum. Optum CEO Larry Renfro told investors in April revenues were on pace to triple from 2011 as it continued to “align and integrate” its businesses.
In a Q1 earnings call, Advisory Board CEO Robert Musslewhite said the company serves 3,000 U.S. hospitals, 400 international hospitals and 1,100 nonprovider healthcare organizations. At the end of March, the company listed a total of 4,482 healthcare members, a slight increase from a year before. The company's renewal rate is very high for healthcare members, with U.S. hospitals renewing at 96%, which is consistent with the previous year.
Industry insiders have speculated Advisory Board’s 2015 acquisition of education business Royall for $850 million distracted the company from its healthcare work, resulting in slow growth.
In the deal announced Tuesday, Advisory Board stockholders will get about $54.29 in cash per share. That includes the value of its stake in Evolent Health.