Cantor On Envision-AmSurg Deal: Potential Ambulance Restructuring Could Lift Shares By $4-$5

Cantor Fitzgerald said the merger between Envision Healthcare Holdings Inc (NYSE: EVHC) and Amsurg Corp (NASDAQ: AMSG) makes "strategic sense," and the potential restructuring of a non-core business could boost shares by $4–$5.

Analyst Joseph France still sees value in a restructuring or spin-off of AmSurg's ambulatory surgical centers and Envision's AMR ambulance business, which are not directly related to the core physician services operation.

"We estimate AMSG ambulatory surgical centers could be worth $2–2.5 billion and EVHC's AMR ambulance business $2.2–2.8 billion. We think such a restructuring could translate into a $4–$5 upside potential in the stock price," France wrote in a note.

France maintains his Buy rating on Envision, but cut the price target to $31 from $37 to reflect the lower-than-expected offer for Envision from AmSurg. Further, the analyst doesn't expect any competing bids.

France sees pro forma combined 2016 revenue of $9.9 billion and adjusted EBITDA of $1.3 billion. The analyst expects pro forma combined adjusted operating EPS of $4.42 for the company in 2016 ($4.68, if all cost synergies realized in one year), based on his corresponding $4.35 estimate for AmSurg and $1.50 for Envision.

At the time of writing, shares of Envision were up 1.28 percent at $26.14, while AmSurg shares were up 0.61 percent at $78.91.